Rents have risen slightly for apartments in Manhattan and Brooklyn, while vacancies have slightly decreased, taking the rate down to the lowest level seen since June, 2012.
Citi Habitats, in a mid-year market report, reported a rosy picture for landlords that also showed a decline in move-in incentives, which were found in 25 percent of leases signed in June. (They were used in 27 percent of leases signed in June, 2018.) Overall, rents rose an average of 7 percent in Manhattan and 5 percent in Brooklyn, since June, 2018.
The rate of concessions were very different in the two boroughs though. In June, 39 percent of leases in Brooklyn included at least one incentive, versus 17 percent in Manhattan. In Brooklyn, they were most common at newly developed luxury buildings due to the high-end market glut in downtown Brooklyn, Williamsburg, Greenpoint and other neighborhoods.
But even with the incentives, Citi Habitats says the leasing activity shows a continued demand for rental housing.
“The vacancy rate has fallen for six consecutive months, and has reached a seven-year low,” explained Gary Malin, president of Citi Habitats. “While their use is down considerably, move-in concessions remain an important tool in this busy, but price-sensitive, marketplace. They are an effective way for owners to keep their face rents high, while still providing a sense of ‘value’ to apartment-seekers.”
An Elliman report showed similar year to year stats, and Jonathan Miller, CEO and president of Miller Samuel real estate appraisers and consultants, said the rise in rents is due to a slowdown in home sales, which has been blamed on new federal tax law, and would-be home buyers waiting to pick their moment.
“Consumers are camping out in the rental market,” said Miller. “In the northeast where prices are higher, taxes are higher. The first thing that happens is consumers pause.”
As for the concessions being higher in Brooklyn at luxury developments, Miller said along with a high supply of new, luxury rental housing in the borough, the market is generally just softer at the top.
In Brooklyn, concessions such as free rent deals or broker fees paid by the landlord were offered in 69.7 percent of leases at new developments, while at existing developments, the rate was far lower at 30.1 percent.
Elliman found median rents rise by 5.3 percent to $3,000. The median net effective rent, including concessions, also rose by 5.9 percent to $2,914. Concessions declined from 40.4 percent of leases to as 38.4 percent. Days on the market were down from 27 to 25.
In Manhattan, median rents increased 4.4 percent to $3,550. The median net effective rent, which includes concessions, rose 4.7 percent to $3,471. The percentage of new leases with concessions was 32.2 percent, down a year from 32.6 percent. Days on the market also fell from 27 to 24.
Aleksandra Scepanovic, managing director and founder of Ideal Properties Group, pointed out that while rents always cycle and fluctuate throughout the seasons, what’s different now from just a year ago is the expectations tenants have, due to recent changes to local housing law.
“The lawmakers have ushered in a new era: a merry time for the New York City tenants looking for new homes or choosing to stay in their current ones,” said Scepanovic.
“Renters now get to comfortably expect a lot more from the rental market – lower application fees, lower broker fees, stable deposit circumstances, as well as predictable upfront rent costs. They also expect a higher degree of security at time of their lease renewal – or at least an option to be informed early of their landlord’s intentions. None of these measures and opportunities existed this time last year.”
Landlords, meanwhile, are likely to raise their own standards as far as who gets to live in their buildings.
“The new rent regulations will produce a stricter landlord, one less inclined to approve tenancy of a poorly qualified tenant,” said Scepanovic. “When in doubt, landlords will be more inclined to reject an application, knowing in the back of their minds that a non-paying tenant will take much longer to replace.”