As vaccines rolled out, schools started and businesses opened, New York rent prices have soared to pre-pandemic levels. Unbelievable apartment deals from the height of the pandemic are a thing of the past. But as the holidays approach, the rental market in New York has stayed hot — and expensive — especially compared to a year ago.
So, what continues to drive up rent prices for New York City apartments?
New York rent prices are still up nearly 60 percent from last year
“It was inevitable that people would return to the city,” posits George Case of Warburg Realty. “And it is inevitable that, as people return, inventory will shrink and prices will go up.” Rent prices were thought to have peaked during “hot vax summer” in July in Manhattan. Renters hadn’t expected New York rent prices would be spiking even higher in the fall, but that’s exactly the case.
Now, in early fall, as most have heard, New York has become the most expensive market for renters, surpassing perpetual leader San Francisco. So, where does New York stand compared to this time last year as fall rolled into the holiday season?
Currently, as of September 2021, an average one-bedroom apartment in Manhattan is leased for $4,887. That marks a more than 58 percent increase from this time last year. That’s probably not surprising. However, that figure is also up nearly 15 percent from just last month, 8 percent over the previous high in July and 14 percent higher than pre-pandemic March 2020. In fact, that’s the highest average rent New York has experienced in over two years.
The same explosion can be seen in two-bedrooms, as well. Right now, average doubles are leasing for $7,018. That notches a 43.4 percent increase from a year ago and a slight near 4 percent growth from last month. That also marks a stunning 22 percent increase from the start of the pandemic and a 13 percent jump from the normal days of September 2019.
Those are the how much’s. What about the why’s?
1. Demand is driving skyrocketing rental prices
Overall, the most obvious factor of why New York rent prices are up yet again is demand. Regardless of the specific reasons, demand will always boost lease prices. At the height of the pandemic when New York was an epicenter, people left in droves. They went to the suburbs, to Jersey, elsewhere with relatives or simply somewhere they thought safer.
As demand continued to drop in fall 2020 as the second wave spread, so did rent prices. But in our return-to-normal world now, prices are rising yet again as demand continues to surge.
Cities like New York are seeing apartment demand levels usually reserved for the for-sale housing market. That sentiment has been seen and felt by apartment brokers from around the city. “I don’t think it’s ever been a [time] where there have been so many people interested in every apartment that comes up,” says Raymond Gani, a broker for Misrahi Realty Group. Adds Maria Daouf of Warburg Realty Manhattan, “The last several months have been the busiest months I have seen in more than 20 years.”
This past spring saw a two-fold increase in rental applications compared to 2020. Demand continued to soar as summer turned to fall, which increased along with lease prices. One of the big reasons demand has been able to thrive is that New York never took the tumble naysayers predicted.
2. People returning to “not dead” New York pushing up demand
James Altucher’s pessimistic New York Post column from August 2020 boldly declared, “New York City is dead forever.” That sentiment led comedian Jerry Seinfeld to respond, “We’re going to keep going with New York City if that’s all right with you, and it will sure as hell be back.”
A year later, turns out Seinfeld was right.
The primary — but not only, mind you — observable reason for increased demand leading to higher New York rent prices was those who fled New York in 2020 finally coming back to the city this fall. Vaccines rolled out, indoor mask mandates returned and everyday safety became normalized. It’s in this atmosphere that New York City began to open up.
But hasn’t New York been opening up for months? Why are rents continuing to increase, why is demand still rising? To rephrase Ernest Hemmingway, because it happened gradually, then suddenly.
3. Students and office workers are the biggest demand source
One of the biggest factors in rental demand is that now, August and September are the starts of the new academic year, for both scholastic and collegiate students.
Universities all over New York are transitioning out of remote classes and requiring students to attend in person. This obligated college students’ return to New York from around the tri-state area and around the country. All these students needed somewhere to live and the college rental market flooded. Lease prices shot up to the anxiety of budget-conscious off-campus renters.
As well, New York City public schools only just opened up in mid-September. Many families had left the city when remote schooling became the norm. Now, the largest school district in the country has reopened just recently without remote learning as an option. If those families wish to keep their children in the New York school system, they had to come back to the city and rent those multi-bedroom apartments in demand.
And of course, corporations and companies across Manhattan have started to open up their cubicles and warehouses and ask (or insist) vaccinated employees return to the office on site. Many of those who have been enjoying Zoom meetings now must make a return to the city. Even those with high-paying jobs seeking high-rent apartments are finding price increases and significant competition.
4. New Yorkers are returning as the city opens for business
As offices open, so have places to shop and recreate. Hanging out the “Open For Business” sign on the city has brought people back in droves. Broadway, for example, recently reopened. Most shows are having post-pandemic premieres throughout November and December. Don’t discount the impact. Shows on the Great White Way support nearly 100,000 employees.
The same goes for concert venues, live sports and other indoor events, as well as bars, restaurants and retail shops, now back open. That is the lifeblood of the New York rental market.
With people returning to New York, there had to be somewhere for them all to live. New York’s grand reopening is requiring people to return, and both demand and rent prices continue to rise. “We never bought into the New York is dying theory,” reports Jay Parsons, Vice President and Deputy Chief Economist at RealPage. “But it’s been a remarkable rebound for the city to see it start to come alive again,”
5. Other external factors are helping push New York rent prices up
For sure, New York City’s systemic apartment culture took a punch during the pandemic. But it never hit devastating levels some feared. The city’s apartment vacancy rate sits around 3 percent in a typical year. But even at the height of the pandemic, vacancies never broke 6 percent. New York never became a rental wasteland, which flattened the return curve.
This is one of several other factors to why rents are rising in New York City compared to this time last year and continuing to rise from high levels this summer.
6. It’s the economy
The economy itself, along with its associated factors, is also driving New York rent prices up. The actual everyday cost of living has been rising, as well, throughout the year. Even discounting an outlying 2020, inflation is up 6 percent since 2019. These costs are passed on by property owners to leasees.
Additionally, there’s a good argument to be made that current rent prices are a market overcorrection. Since 2020 was so difficult for landlords, New York rent prices are swinging too far the other way. High rents today may not start to normalize until 2022.
It’s not just leasing base prices that are causing a continued rent increase. Property owners were so desperate for renters that they went above and beyond with incentives. Now, as demand spikes, discounts are vanishing. Enticements like no-rent months, signing bonuses, free parking and free amenities are also disappearing and are becoming baked into rent prices once again. Even broker fees, banned for over a year, are back at higher-than-before rates now that they’re permitted again.
What other economic factors are pushing demand and rent prices? As competition increases, fewer sublets are available across the city, eliminating a cost-saving option. As well, fall is traditionally still a part of the season where new-lease rents are higher than during the winter. And in general, this is a bad time to buy a house and many would-be homebuyers are turning to apartment renting.
7. New Yorkers are back and they’re staying
And despite the delta variant and vaccine hesitancy, don’t expect another exodus any time soon. This go-’round isn’t creating the same dread, especially among the vaccinated. New Yorkers don’t have plans to abandon the city again. “If you didn’t move out of the city in the past 18 months due to the pandemic, you’re probably here for the long term,” notes Julie Gans of Compass Real Estate. “Most people who wanted to move already fled the city.”
In fact, some may even be looking to rent a larger apartment or one with more outdoor space in case another lockdown comes along.
Affordable rentals are still around if you keep searching
The bad news is that rent prices are still at high levels. Students, high-rise employees and families have all seen rents increase whether they are moving back or have been in the city all along. The good news is that many of the factors causing high rent prices this fall are likely to normalize in the coming months.
Methodology
Rent prices are based on a rolling weighted average from Apartment Guide and Rent.’s multifamily rental property inventory as of October 2021. Our team uses a weighted average formula that more accurately represents price availability for each unit type and reduces the influence of seasonality on rent prices in specific markets.
The rent information included in this article is used for illustrative purposes only. The data contained herein do not constitute financial advice or a pricing guarantee for any apartment.
