Manhattan rents hit record as market shows signs of cooling

New York

THE median rent in Manhattan reached nearly US$3,400 in December, the highest price ever recorded for the typically sleepy month, but slowing lease activity citywide suggests a gradual return to prepandemic norms, according to new market reports.

The median net-effective rent, which includes price concessions from landlords, was US$3,392 in December, 21 per cent higher than the same time a year ago, and the highest price recorded in the month since at least 2010, when these numbers began to be tracked in New York City, according to the brokerage Douglas Elliman. (The highest median rent was reached in April 2020, when it peaked at US$3,540 a month.)

But new signed leases, a measure of demand, were down almost 39 per cent from the same time last year, to 3,335 from 5,459, when a rush of mostly affluent renters began returning to the city amid rising vaccination rates, said Jonathan Miller, an appraiser and the author of the report.

"December was the first step toward some sign of normalisation," Miller said. "It's basically come off a period of massive surge."

Still, the decrease in the number of new leases is more reflective of a return to longtime patterns than a drop in renter interest, he said.

Compared to the same month 2 years ago, before Covid, new signed leases were still up 18 per cent. And December marked the first month in which Manhattan's median rental price exceeded that of the pre-pandemic period - up 0.1 per cent from December 2019.

Rents have climbed fastest in the most expensive markets in the city, where affluent renters were the first to leave the city, and had the financial means to return.

Doorman buildings in Manhattan, a proxy for most of the luxury market, had a median monthly rent of US$4,207 in December, up nearly 30 per cent from a year earlier, and almost 8 per cent higher than at the same time 2 years ago. Non-doorman buildings recorded a median of US$2,625, up 11 per cent from last year, but still down 6.6 per cent from 2019, showing that the bottom half of the market has been slower to recover, Miller said.

Rent hikes were especially sharp in downtown Manhattan, where the median asking rent jumped 40 per cent in the fourth quarter, to US$4,200 from US$3,000 in the same period a year earlier, according to the listing website StreetEasy. SoHo led the city with a 58 per cent increase in the fourth quarter, up to US$6,002 from US$3,800.

For much of 2021, a burst of renter activity - spurred by rising vaccination rates and a short-lived push for some workers to return to the office - subverted market expectations, said Edith Yang, an agent with Compass.

"Seasonality is out the window for both the rental and sales markets," she said, referring to the typically slow winter months, when renters tended to get discounts on new leases.

But she expects a gradual return to regular leasing patterns beginning in the next few months, as more renters face the sticker shock of expensive lease renewals, landlords continue to pull back concessions and more inventory hits the market.

A return to normal is not welcome news for hundreds of thousands of renters who were struggling to stay current even before the pandemic. In December, more than one-eighth of the country's renters who were behind on payments lived in New York City, said Nancy Wu, the chief economist at StreetEasy.

"Rising rents and low inventory exacerbate the problem," she said. "And another rush to the rentals market in the coming months will make it more difficult and competitive than ever for New Yorkers to find a suitable, affordable apartment."

A statewide pause on evictions is set to expire on Jan 15, and Governor Kathy Hochul signalled on Tuesday (Jan 11) that she will not extend the moratorium again, when she said the pause will conclude "very shortly."

While federal funding for New York's emergency rental assistance programme fell far short of the state's request, tenants can still apply for help. NYTIMES