Rents in Manhattan hit another all-time high in July, the third record high in the past four months, even as rents are cooling in other parts of the country.
In New York City, rental activity typically builds from spring to a peak in late summer. This year, rents have been staying high and repeatedly breaking records, according to a report from Douglas Elliman, a brokerage, and Miller Samuel, an appraisal and consultant firm.
The median cost of renting an apartment in Manhattan was $4,400 in July. That’s up 6% from a year ago and up 2.3% from June, when rents hit were at $4,300.
A one-bedroom apartment in the borough had a median rent of $4,295, up 7.4% from last year; while a two-bedroom apartment had a median rent of $5,200, up 4% from a year ago. A studio apartment rents for a median price of $3,200, up 6.7% from last year.
Not only did median rents go up, but the amount of concessions — or incentives offered by landlords — continued to drop. Only 9.3% of new rentals had sweeteners, while nearly 13% did a year ago.
All the metrics for rent tracked in the report — including median rent, median rent inclusive of concessions and the average rent — hit record highs. Average rent for all apartments was $5,588.
The average and median prices hit records in the boroughs of Brooklyn and Queens in July, as well. The median price for all apartments in Brooklyn was $3,950, up 16.2% from a year ago and the median price for rents in northwestern Queens was $3,641, up 15.7% from last year.
Higher prices are pushing renters out of the market
“For the past five months, rents in Manhattan have been setting records or were at near-record levels,” said Jonathan Miller, president and CEO of Miller Samuel.
To see such a strong showing in July is not surprising, given peak leasing season is July and August for the year, he said. But what is different about this year’s seasonal peak is that leasing activity is down, dropping 6% from last year. Typically that would be rising, year-over-year.
And it may be because renters have reached their max.
“Because of the record-high rents, we’re starting to see a consistent decrease in leasing activity,” said Miller. “The rents are pressing higher to new records, and we are seeing people pull back.”
Unlike the purchase market across the country, in which sales are dropping because there simply aren’t enough homes to buy, rental inventory in Manhattan is in pretty good shape.
Listing inventory in Manhattan on a year-over-year basis is up more than 10%, and rental inventory in Manhattan is almost 25% higher than it was pre-pandemic, according to the report.
“It isn’t the lack of supply that is pushing leasing activity down,” said Miller. “We’re seeing evidence that the decline in leasing is due to the challenge of affordability.”
Back in January, Miller said 2023 would likely be a “year of disappointment” for many buyers and renters in New York, with home prices and rents staying elevated and affordability challenges not budging much.
It seems to be playing out that way.
“It is disappointing for many,” he said. “The idea that rents are at their peaks or near peaks doesn’t suggest a significant improvement in affordability.”
Landlords are pressing as hard as they can, as though to make up for money lost during the pandemic, although Miller said the rationale for making up for what was lost is dated now that Manhattan rents have been breaking records for months.
The landlords’ time to ask sky-high rents is tapering seasonally, said Miller, who expects rents to level off this fall.
But rents are not expected to drop considerably, at least not in the short term.
Miller said it is unclear what would cause a big drop in rents aside from a major financial or economic shift like a recession, said Miller.
Part of the reason rents remain so high is because mortgage rates remain elevated, keeping some people in the rental market rather than buying a home.
“The pressure on mortgage rates is still there,” said Miller. “If mortgage rates were to fall suddenly that would take a lot of wind out the sails of rents.”
