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New York’s rents drop as vacancies increase. Could rent regulation be next thing to fall?

U Santini Inc. employees wrap boxes at their Park Slope warehouse. (Hiram Alejandro Durán/THE CITY)

By Greg David and Rachel Holliday Smith, THE CITY 

This article was originally published on by THE CITY

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Since the pandemic struck the city, mover Dan Menchini has picked up the belongings of 200 New Yorkers and put them in storage as they left town. 

The customers, he said, either allowed their leases to lapse or talked their landlords into terminating their leases — but weren’t ready to decide on a permanent place to live.

Dan Manchini, owner of of U Santini Inc., has seen a rise in people moving during the coronavirus outbreak, July 24, 2020. (Hiram Alejandro Durán/THE CITY)

“This has never happened before,” said Menchini, the owner of U Santini Inc., a 90-year-old moving company in Brooklyn. “They send me their keys and say, ‘Pack it up and put it in storage and we’ll figure it out later.’ There are so many people in flux.”

With thousands or more leaving New York, rents are dropping for the first time in years, and residential housing experts say the decline will continue for the rest of 2020. What happens after that is unclear to even the experts.

Meanwhile, vacancy rates are increasing — and if the trend holds, New York’s system of rent regulation could be endangered since it is based on a housing emergency defined as a vacancy rate of 5% or less. A key official vacancy survey is expected to begin next year.

“I view the summer as the spring market that never took off because of the shutdown,” said Jonathan Miller, chief executive of Miller Samuel and the author for decades of the Elliman reports that track the region’s residential markets. “Then after Labor Day all bets are off. I think the rental market hasn’t found its level yet.”

A Downward Trend

Recently released numbers show a dramatic change in the market where rent increases once seemed relentless.

The median rent in Manhattan dropped 4.7% in June, the first decline since 2018 and reversing all the increases of the past two years, according to Elliman. Rents fell a little less in Brooklyn and by more than 5% in northwest Queens. The report doesn’t track The Bronx and Staten Island.

Elliman Report

One-third of Manhattan rents were discounted from their asking price, by an average of 7%, according to data from StreetEasy.

The Manhattan vacancy rate, Elliman found, jumped 2 percentage points to 3.67%, a 14-year high.

The data is only available for new leases and significant concessions on lease renewals would also show declines in rent, Miller said.

Neither Miller nor Nancy Wu, an economist at StreetEasy, was willing to make a prediction of how much more rents will decline. 

But Wu noted that many leases are expiring this summer which will translate into lower rents as demand falls and inventory rises. One factor: It isn’t clear how many college students will return with many classes exclusively online.

‘We Love New York’

The key, however, is the decision of many people to leave the city, either temporarily or permanently.

Sean Sullivan and his family made the agonizing decision to leave New York temporarily during the quarantine. 

He and his wife, both attorneys, stuck it out working remotely with their 4- and 6-year-old kids in their Prospect Heights two-bedroom apartment until the end of May. That’s when the kids began refusing to go outside, unwilling to suit up with masks and gloves just to play on a small patch of sidewalk near their building.

“They felt a lot of anxiety,” he said. “It was just a lot.”

The couple debated leaving “for weeks,” he remembered. She was born and raised in Manhattan and he had lived in New York for more than 20 years. Neither wanted to flee the city “in a time of crisis,” he said.

Ultimately, they decamped to his in-laws’ house in Vermont. Now, they go on hikes every weekend, and the kids have room to run around. But they plan to leave Vermont in late August.

“We will be back,” he said. “We love New York.”

Sean Sullivan and his family moved from Brooklyn to Vermont temporarily during the COVID-19 crisis.
(Photo courtesy of Sean Sullivan)

THE CITY (www.thecity.nyc) is an independent, nonprofit news organization dedicated to hard-hitting reporting that serves the people of New York.

 

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