An “Apartments For Rent” sign outside a building in the East Village neighborhood of New York, USA.
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Manhattan rents rose 2% in November, dashing hopes that prices would cool and forcing many renters to give up their leases or downsize, according to brokers.
According to a report by Douglas Elliman and Miller Samuel, the median rent for an apartment in Manhattan in November reached $4,033, up from $3,964 in October. Median rent, which is often skewed by luxury goods sales, fell slightly over the month but is still up 19% from last year, reaching $5,249 in November.
The increases continue to defy predictions that New York’s sky-high rents would fall after the summer and provide some relief to renters after rents hit all-time highs. While rents are declining in many parts of the country, New York rents remain stubbornly high and the number of unrented or vacant apartments remains low.
“Rents are not going down as fast as many would hope,” said Jonathan Miller, CEO of Miller Samuel.
Rising rents in New York also add pressure to headline inflation, as rents are a major component of inflation rates and New York is the largest rental market in the country.
Manhattan rents are so high that many renters have begun to resist the prices, either moving out of town or looking for smaller, less expensive rentals. The number of new leases signed in November plummeted 39% from October, marking the largest decline since the start of the pandemic in 2020, according to Miller.
Real estate brokers and experts say landlords overreached when they began renewing leases signed in 2020 and 2021, often demanding rent increases of 20% or more. Since landlords generally require tenants to have an annual income of 40 times the monthly rent, rising median rents have pushed many renters over the edge.
“There is some stagnation,” said Bess Freedman, CEO of Brown Harris Stevens. “In 2021 rents have skyrocketed and now tenants are trapped. People aren’t going to sign new leases at these prices, they are too expensive. Landlords need to start being more reasonable.”
Freedman said one of her friends faced a 30% rent increase with a recent lease renewal. “She felt like she was being ripped off,” Freedman said.
Vacancy rates remain low, putting little pressure on landlords to lower rents any time soon. The vacancy rate in November was 2.4%, still below the historical norm for Manhattan of around 3%, according to Miller Samuel.
There are some early signs that landlords may start to capitulate in 2023. The number of landlord concessions, which can include a free month of rent and other offers, increased from 13% in October to 16% in November. Real estate experts say the huge drop in new leases, if it continues, will eventually force landlords to find lower-priced tenants.
Joshua Young, executive vice president and general manager of sales and leasing for Brown Harris Stevens, said landlords were too optimistic in expecting rent increases of 20% or more, and many are now starting to lower prices or add more concessions to keep their apartments occupied.
“A lot of owners are stuck with inventory and aren’t getting their raises, so they’re cutting prices,” he said.
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