According to a report by brokerage firm Douglas Elliman and Miller Samuel Real Estate Appraisers and Consultants, the monthly rent paid by a tenant on a Manhattan condo or co-op was $3,870 in April, up 39% from a year earlier . Last year, the effective net median rent — or the amount tenants pay after accounting for landlord incentives — was $2,791.
“Rental rates accelerated significantly in April, up almost 40%,” said Jonathan Miller, Miller Samuel’s president and CEO. He said that over the previous six months, the typical annual increase was about 22%.
Inventories are also at historically low levels, Miller added. “All the oversupply that skyrocketed in 2020 has been eliminated and there isn’t much inventory available,” he said.
Interest rates on a 30-year fixed-rate mortgage climbed above 5% last month and are expected to continue rising, causing many would-be homebuyers to exit the market as rising monthly payments reduce their spending power.
“The rise in mortgage rates has pushed people looking to buy a home into the rental market — a market that’s already seeing record high prices and demand,” Miller said.
Landlords are back in the driver’s seat
Long gone are the days when desperate landlords offered months of free rent or paid brokerage fees for tenants during the pandemic. With rents now about 10% above pre-pandemic levels, landlords rarely offer these incentives, Miller said.
According to Miller, just 15.7% of leases signed in April had discounts, the lowest in seven years.
Instead, the number of bidding wars has increased over the past three months, driving up rents. One in five apartments rented in April was rented for more than the list price, Miller said, with an average rent increase of 11% over the list.
“Agents with a new listing that comes out will get 20, 50 or even more requests in the first few hours, resulting in multiple offers,” said Hal Gavzie, executive manager of leasing at Douglas Elliman. “A bidding war develops and the landlord is in the driver’s seat.”
While prospective tenants offering a higher rent could secure the apartment, Gavzie said, landlords may also be interested in them signing a two-year lease or moving-in flexibility.
“It’s pretty simple: Demand far exceeds supply,” Gavzie said, “More rent or better terms are not uncommon, anything that might make it more comfortable for this landlord.”
This dynamic is not expected to change anytime soon as the city enters some of the most active months in the rental market between May and August. During this time, many Manhattan renters who previously secured a pandemic discount could reach the end of their lease and face an entirely new and much more costly reality, Gavzie said.
“Some of these renters who were able to get this 30% to 50% discount, what are they going to do now that the rent is 30% or 40% higher?” he said. “Can you afford that?”
Overall, so far he has seen tenants stay and pay the much higher rent.
“Most of the time we see people stay in place because the cost of moving combined with limited inventory and competition just makes finding a new location too difficult,” he said.