The monthly rent paid by a tenant for a condo or coop in Manhattan was $3,870 in April, up 39% from a year earlier, according to a report from the brokerage firm Douglas Elliman and Miller Samuel Real Estate Appraisers and Consultants. Last year, the net effective median rent — or the amount tenants pay after factoring in incentives from landlords — was $2,791.
“There was a significant acceleration in rental prices in April, jumping nearly 40%,” said Jonathan Miller, president and CEO of Miller Samuel. He said that in the preceding six months the typical year-over-year increase was around 22%.
Inventory is also at historically low levels, added Miller. “All the excess supply that rocketed skyward in 2020 has been eliminated and there is not a lot of available inventory,” he said.
Rates for a 30-year fixed-rate mortgage climbed above 5% last month and are expected to keep rising, causing many would-be homebuyers to opt out of the market as rising monthly payments diminishes their purchasing power.
“The rise in mortgage rates has tipped people on the margin, looking to buy a home, into the rental market — a market that is already seeing record-high prices and high demand,” said Miller.
Landlords are back in driver’s seat
The days of desperate landlords offering several months of free rent or paying broker fees on behalf of tenants during the pandemic are long gone. With rents now about 10% above pre-pandemic levels, landlords are rarely offering these incentives any more, Miller said.
Only 15.7% of leases signed in April had discounts, the lowest in seven years, according to Miller.
Instead, the number of bidding wars has been increasing over the past three months, pushing rents higher. One in five apartments leased in April rented for more than the listing price, said Miller, with an average rent increase of 11% above list.
“Agents with a new listing hitting the market are getting 20, 50, even more inquiries in the first couple of hours resulting in multiple offers,” said Hal Gavzie, executive manager of leasing at Douglas Elliman. “It turns into a bidding war and the landlord is in the driver’s seat.”
While prospective tenants offering to pay a higher rent may secure the apartment, said Gavzie, landlords may also be interested in having them sign a two-year lease or flexibility when it comes to when they move in.
“It is pretty straightforward: the demand is just so far outweighing the supply,” said Gavzie, “More rent or better terms are not uncommon, anything that might make it sweeter for that landlord.”
This dynamic is not expected to change soon, as the city heads into some of the most active months in the rental market between May and August. It’s during this time that many Manhattan renters who previously secured a pandemic discount may be coming to the end of their lease and be facing an entirely new and much more costly reality, said Gavzie.
“Some of these renters that were able to get that 30% to 50% discount, what will they do now that rent is 30% or 40% higher?,” he said. “Can they afford that?”
So far, overall, he’s seen tenants stay and pony up the much higher rent.
“Mostly we’re seeing people stay put, because the cost of moving, in tandem with the limited inventory and competition, just makes finding a new place too hard,” he said.