(NEW YORK, NEW YORK)— New York landlords are finally beginning to drop rental prices modestly in response to the COVID-19 crisis. The change in the housing market has come sooner than experts had predicted based on past recession patterns. As recently as June 18th, StreetEasy economist Nancy Wu speculated to The New York Times that it could take up to 18 months for the COVID-19 recession to be reflected in the housing market. However, the most recent report from NYT implies that impacts will be felt much sooner. Median rental prices have already dropped 4.8 percent compared to the same time last year.
As demand falls and vacancies reach record highs, beleaguered tenants have eagerly anticipated a shift of the market in their favor. Surveys suggested at least a third of all renters, of both commercial and residential properties, were unable to pay their rent in full for July. At the same time, many tenants, especially younger tenants with families to return to and renters with significant means, have fled the city, sometimes even for the long haul. The density of New York has become an unnerving drawback in the face of COVID-19. With unemployment skyrocketing from 3.6 percent in January, a 50-year record low, to 11.1% by July; many companies moving to remote work, possibly even permanently; and most of the major attractions of New York life on hold, at least until an invention of a vaccine or a cure, many are seeing fewer reasons to pay sky high NYC rents.
However, landlords are proving slow to respond to market changes or even outright unwilling to adjust to the market as much as tenants had hoped. In fact, in mid-May, Realtor.com reported that rents had continued to rise, according to data gathered from newly signed leases. The recent report from New York Times is the first good sign for tenants.
Yet it’s not clear if concessions that landlords are starting to offer will be proportionate to the impacts that renters feel. To tenants who have lost their jobs and face months of back pay on missed rents, landlords seem obstinately opposed to negotiating the scale of relief that they feel they would need. When the temporary eviction block is lifted at the end of August, housing advocates anticipate up to 50,000 cases will be brought to court. State instituted rent-relief plans have also largely aided landlords by providing rent-covering vouchers, rather than tenants, who have mostly received very little. Meanwhile, the much welcome rental decreases have yet to make housing affordable to the broad majority, especially workers in high-contact, low wage industries. This month’s modest decrease has brought the median rental price to $3,378 a month. According to NYC rental laws, a family would have to make a minimum of $135,120 to afford such an apartment. The area median income for a family of three in New York City is $102,4000.
It is also not clear, at least to this observer, that the falling rental prices are truly a response to COVID-19 or a normal market adjustment in response to the record highs and steady increases that we saw in the Manhattan rental market last year. June 2019 saw record high median rental prices for one-bedrooms; August saw those records broken again; the trend continued in December 2019 again. Rents were rose at faster rates than they had since 2016. While the most recent news from NYT cites an increase in concessions in the summer of 2020 (offers including a free month of rent, a reduction in fees, an addition of amenities, etc.) this was only after eight straight months of continual decrease in concessions in 2019.
While everyone in New York is experiencing whiplash in wake of the pandemic, New York landlords are still more insulated from the market shocks that many of their tenants have experienced. The majority of landlords in NYC are not the fabled “mom-and-pop” landowners but mostly large institutions owning at least 15 buildings or more. While the rapidity of the market flux may come as a shock to landlords now, the falling rents still have yet to reflect the full reality of the COVID-19 crisis. Perhaps they never will.