Photo: Robert Clark
Overall, Manhattan’s rental market has had a speedy recovery from the Great Recession. And while renters may not exactly be ecstatic to know that rents are now above pre-recession levels, it is positive news for the overall market, according to a new study by the listing site Citi Habitats.
For its study, Citi Habitats examined listings in Manhattan that were below 96th Street, from 2007 through 2016. It included pricing data on studios, and one- to three-bedroom units.
In 2016, using the “landlord’s 40 times the monthly rent” calculation, a Manhattan renter would have to earn a minimum of $100,000 per year to qualify for just an average studio apartment. In other words, to qualify for an apartment a renter would have to earn 40 times the monthly rent annually. Renters eyeing a three-bedroom in the borough need to take in $235,000 annually.
Over the last decade, the average Manhattan rent increased 9 percent. In 2007 the average rent was $3,724, while in 2016 it was $4,056.
Initially rents declined as the economic crisis hit, but then rebounded higher. Rents dropped to an average low of $3,399 in 2009. The only years that saw rent declines were 2008 to 2009, the beginning of the economic crisis which affected NYC’s employment rate and, in turn, demand for housing, says Citi Habitats.
The largest annual increase in the average rent occurred in 2011 when it rose to $3,715, an increase of over 8 percent from the previous year.
But with Manhattan rents now surpassing pre-recession highs, the borough is unaffordable to many New Yorkers — who are now looking elsewhere for affordable housing options.
Manhattan’s vacancy rate peaked at 1.93 percent in 2009, early on in the Great Recession. It dropped to 0.96 percent just two years later — the lowest reading during the study’s ten year period. Today, Manhattan’s vacancy rate is again on the rise as more renters are fleeing the borough’s rising prices.
“As a result of high prices in Manhattan below 96th Street, there has been incredible demand for new rental housing in the upper reaches of the borough, as well as in Brooklyn, Queens — and most recently — The Bronx,” Citi Habitats says.
The use of incentives by Manhattan landlords has been cyclical over the last decade. Incentives are often used by landlords to help fill empty units, and usually entail a period of free rent. In recent months, landlords have become more creative and offered less common incentives like Netflix subscriptions.
The use of incentives was at its highest level in 2009, the year Citi Habitats first began tracking incentive use. Some 52 percent of leases included incentives by landlords in 2009. That number steadily dropped to a low of 7 percent in 2013 when the vacancy rate was 1.42 percent.
Since then, it has climbed steadily, rising to 22 percent in 2016 — and the vacancy rate had risen to 1.84 percent, inching closer to 2009’s peak.
Manhattan’s new construction levels may be impacting the rising vacancy rate as well. In 2007, there were 2,355 new construction units on the market, whereas 5,685 new construction units came on line in 2016. With more product available — often at a high price point so developers can break even — it stands to reason that more units may remain vacant as renters move to the outer-boroughs. And that landlords would try to lure prospective renters with incentives.
“Although it’s had ups-and-downs, our city’s rental market has consistently remained among the nation’s strongest and most competitive, sometimes to the chagrin of would-be tenants,” says Gary Malin, President of Citi Habitats.
Click here to read the entire study.