As hundreds of thousands of New Yorkers have fled the city to wait out the coronavirus pandemic, renters who have stayed in their apartments are wondering if and when rents might fall.
With so many fewer people in the city and the region just now taking tentative steps toward reopening, many tenants have hoped and believed that landlords, presumably struggling to fill vacancies, would be willing to reduce rents. But those looking to sign or renew leases in the last few months say that while some landlords are grudgingly offering short-term concessions, like a free month of rent, most are unwilling to budge on pre-pandemic pricing and, in some cases, are even increasing rents.
“There is a disconnect between what tenants expect and landlords are willing to give,” said Gary Malin, chief operating officer of the Corcoran Group. “So far, landlords are getting rent and not sitting on vacancies, so they’re not giving 30 percent discounts.”
As the pandemic hobbled huge sectors of the economy, there were dire predictions that many tenants would not be able to pay their rent. But rent collection has remained surprisingly strong during the spring. In New York, a statewide moratorium on evictions passed on March 20 and later extended through Aug. 20 gave renters a reprieve, but because they were still legally obligated to pay their rent, and had to negotiate any rent forgiveness individually with their landlords, many were compelled to continue paying.
Through May 20, landlords across the country reported that they had received 90.8 percent of rents, compared with 93 percent a year earlier. Government aid and informal negotiations between landlords and tenants likely helped stabilize the situation, but as the aid money dwindles in the coming months, collection rates are likely to drop.
In April and May, rents in New York City actually went up year over year, according to StreetEasy’s Rent Index, which measures growth over time. From April to May, rates stayed essentially flat, but year over year May rents were up 0.7 percent in Manhattan, to $3,273, and 3.7 percent in Brooklyn, to $2,744. That’s a smaller annual increase than normal, but an increase nonetheless.
But discounts crept up, too, according to StreetEasy economist Nancy Wu. In May, the number of discounted rentals on the site climbed to 24 percent, up from 14.5 percent in May 2019, according to a StreetEasy analysis. And the discounts were bigger, too — 7.9 percent of the total asking rent, up from 4.8 percent in 2019.
Jeffrey E. Levine, founder and chairman of Douglaston Development LLC, said that during the first two months of the pandemic, there was no change in occupancy numbers at Douglaston’s properties and that rent collection rates hovered around the 90th percentile for market-rate properties — down from 98 to 99 percent in a typical year, but not as much as they’d feared.
“In May, we did start to see people leaving the buildings, people who’d had their jobs affected by the virus or were relocating outside the city, increasing vacancy rates,” Mr. Levine said. “That, combined with not being able to do real tours, made us decide to offer current and new prospective tenants up to one month free for renewal or a new lease.”
But while many landlords prefer a one-time deal, renters are often wary of such agreements because they pave the way for a rent hike the next year.
Chase Kreuter, who started looking for a one-bedroom in Murray Hill this spring, didn’t want to sign a lease with promotional pricing for that reason. Her broker, Matt Bauman, the founder of Bauman Realty, was able to find an apartment in a doorman elevator building on East 29th Street with an actual — not net-effective — rent of about 8 percent less than it would normally be for this time of year, but the negotiations ended there.
“I was trying to get them to lock in a two-year lease, or agree to a rate for next year,” Mr. Bauman said. “They weren’t budging. They were willing to offer these rates now, but think by next year it will be back to normal.”
When Cody Stockton’s landlord asked for a 1.5 percent increase on his $3,250 three-bedroom share in Bedford-Stuyvesant for a July 1 renewal, the 22-year-old financial researcher aggregated rents for every three-bedroom apartment he found on StreetEasy within a three-mile radius. After finding that the average rent was $2,996, Mr. Stockton offered to re-sign at $3,100. The landlord countered with a free month, but still wanted the 1.5 percent increase, which would have averaged out to $3,025 a month — $75 less a month than Mr. Stockton had offered. Mr. Stockton said he wouldn’t re-sign on principle.
“Yes, we get a month free, but you’re still charging more,” he said. “I don’t want to move, but there’s a place right down the street, a newer property, that’s renting for less.”
Brokers and experts attribute the stubbornly high rents to a lack of inventory: By the end of April, the number of new rental listings on the market had fallen 33 percent from 2019, according to StreetEasy, resulting in the fewest new leases on record for the month of May in a decade, according to real estate brokerage Douglas Elliman. Many renters whose leases were up this spring decided not to move, working out extensions or renewals instead. Demand is down, too, although many temporary price drops, discounted sublets and other deals offered to existing tenants aren’t reflected in the data.
“New leases are only about a third of the market, and the new leasing activity you’re seeing now is down 70 percent year over year,” said Jonathan Miller, of the appraisal firm Miller Samuel. “Right now the market data is massively distorted. I think it’s pretty clear if you remove the distortion, rents are already going down.”
Landlords are often open to negotiation and price cuts — up to a point. Sudha Sahai owns a total of six furnished apartments in the East Village and Gramercy, which she typically rents by the month as corporate housing. When the pandemic hit in March, she listed one of the units, a one-bedroom in the East Village, for $6,000 a month with Bill Kowalczuk, an associate broker at Warburg Realty.
After the apartment sat on the market for a few weeks, Ms. Sahai told Mr. Kowalczuk to knock the price down to $5,500. A couple ultimately offered $5,000 for the space, which Mr. Kowalczuk negotiated up to $5,200, with the renters paying the full broker’s fee. “For monthly furnished I get more — so much more I’m not even going to tell you,” Ms. Sahai said. “I wanted it rented.”
Mr. Kowalczuk described that deal as a fair one, but said that many renters are being unrealistic. He’s been regularly fielding offers at 20 to 50 percent below asking prices. One opportunistic renter even tried to finagle a 10-year lease on the Gramercy Park townhouse Ms. Sahai owns, at a 70 percent discount.
A lot of landlords also feel that when real estate agents begin to show properties again during Phase 2 of New York City’s reopening plan — Gov. Andrew Cuomo said Wednesday that the city is set to begin Phase 2 on June 22 — there will be a surge of pent-up demand. As brokers pointed out, landlords who have waited this long want to see that play out before cutting prices.
“It’s going to be a compression of a spring, summer and fall market,” said Jared Antin, the director of sales at Elegran, a New York brokerage. “If you were intending to move you’re still intending to move. We’ve actually seen bidding wars for some of our properties.” Among them was a three-bedroom townhouse in Prospect Lefferts Gardens asking $5,900 that garnered multiple offers after being on the market for just a day, he said.
But those who watch the market closely say that, as the economic recession sets in, prices will most likely fall, if not very fast and not by much at first. At least initially, people may not see big discounts, according to Mr. Miller, but general conditions convey a sense of weakness in the rental market.
“The reality is there still is interest and traffic, people making offers every day, even though stuff is down a lot,” Mr. Malin said. “If I’m an owner, I’d rather take a wait-and-see approach. Tenants who believe the market is in their favor might have to wait a few months to get it,” said Mr. Malin.
Ms. Wu, the StreetEasy economist, said that it took 18 months for the last recession to be fully reflected in rental prices. So a lot will depend on what happens in the next few months, including if recent college graduates still flood the city to start jobs, and if there’s a resurgence of the virus in the fall.
Some landlords may find their hands forced if they want to avoid vacancies. Lincoln Lin, a 22-year-old graduate student at New York University, is planning to move to Roosevelt Island with a friend this summer, leaving behind a $1,075-a-month “king-size” bedroom in a four-bedroom Bed-Stuy share. He always felt that his room was a good deal and figured he’d have no problem subletting for June and July, with an option to renew the lease in August with the other roommates. But so far, he hasn’t had any luck.
“Last year a lot of people would have wanted it,” Mr. Lin said. “But now people are asking to pay less. I’ve also had people wanting to do a month-to-month sublease; I think they’re worried about job insecurity.”
“It’s been a problem,” he added. “The roommates might move out.”
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