NYC Apartment Rents Spike To Near Record, But 2022 Could Be Start Of Market ‘Normalization’

Residential rents climbed again across the city as tenants signed leases at a rapid clip, but the rapidly rising prices could be a reflection of a market that is stabilizing rather than the new normal.

The median net effective rent in Manhattan hit $3,467 last month, according to Douglas Elliman and Miller Samuel's monthly rental report. That figure marks a 2% rise on a record-breaking December and a more than 23% jump on a year earlier.

“It’s an extremely rapid recovery,” Miller Samuel CEO Jonathan Miller said. "I don't think anybody was expecting it that quickly."

Similarly, Brooklyn’s net effective rent leaped 11% in a year to reach $2,747, while rent in Queens soared 30% year-over-year to hit $2,811.

“This is a discovery period," Miller said. "The rental market is normalizing, but it's still not quite there."

These steep rises are a complete reversal from the major low point in the market at this point last year — although current rents are still roughly at or below their levels in January 2020, just before the pandemic upended the housing economics of the city.

“The market continues to be robust, but is normalizing,” Miller said. “We're seeing the massive buildup in inventory largely fall to more normal levels. That has been the story since, really throughout last fall into January."

Miller predicted last year that New York was set for a “youth renaissance” driven by depressed market rents, but that was short-lived. Hundreds of thousands of New Yorkers left in the height of the pandemic, and landlords grew desperate, average rents had dropped 25% by the fall of 2020. In spring last year, they were still down 14%, but have steadily improved since then.

The upper part of the market saw the biggest rent increases last month, Miller said, with doorman apartments up nearly 26%. The average luxury rental in Manhattan was at $9,750 in January, while studios were going for $2,600.

Stories of bidding wars for rentals, and lines around the block for apartment viewings have largely been in the priciest buildings, Miller said. Still, Manhattan recorded its second-most-active January ever, and listing inventory fell year-over-year at a record rate for the sixth month in a row.

Brooklyn is still behind pre-pandemic rent levels, and there is still excess apartment inventory that may take a few months to be absorbed. Rents in the borough reached $2,747, up 11% on a year earlier, and new lease signings were at the second-highest January since tracking began in 2008.

In Queens, the number of new leases hit the highest level for January ever recorded, and rent increased at its second-fastest year-over-year rate on record. But, like Manhattan, the rents are still roughly flat with pre-pandemic levels. 

While remote work policies are often viewed as a blow for New York, Miller believes workplace flexibility is actually a big part of the rental market’s strength right now.

“The narrative was formed in the context of urban-to-suburban relationship, but I can assure you that there will be just as many people, if not more, working remotely from the Upper East Side into their Manhattan office as there are from Westchester,” he said.

But the fact that people have more options could backfire if landlords push too hard, Miller said. With greater mobility, if the rents become too aggressive, people have increased ability to leave.

“It's kind of a double-edged sword," Miller said. "It's a mobility that allowed them to raise rents but it could be the mobility that pushes people away."

The housing shortage is likely to ensure healthy returns for multifamily developers for years yet; the Real Estate Board of New York estimates the city needs 560,000 new units by 2030 to keep up with its predicted population and job growth.

Redfin Chief Economist Daryl Fairweather told Bisnow this week that rents around the country will likely keep going up as demand outstrips supply and interest rates increase. The silver lining, she said, is that people have become more mobile and that could allow them to move to cheaper parts of the country.

“I think 2022 is going to be a very challenging year. But there's going to be a lot of change that happens,” she said on a Bisnow podcast. “The fact that the labor market is so tight makes me optimistic that people will be able to move to places where they have more economic opportunity, and they'll be able to get employed and potentially afford a home down the line.”