New York: An Owner’s Market, Not a Renter’s One

It’s spring, which according to the New York Times, means thousands of recent college grads will soon be hitting the rental market looking for an apartment … and many will be in for a shock.

There is no rental market quite like New York City. As a result, there’s no landlord like a New York City landlord.

In some markets, rental property owners may be having a hard time
filling units as the economy slows. Vacant units have caused
foreclosures in some markets, such as Boston, where multifamily
foreclosures rose 27 percent from February 2007 to 2008, according to
the Boston Herald.

But New York’s rental market remains strong.

With $3,000 average monthly rents in some neighborhoods, its market is pricey–and also large. Because home selling prices are so high in New York, 75 percent of the city’s housing stock are rental properties.

Perhaps that’s why the rental market is so strong: Vacancy rates in New York City hovered
around 1 percent for the third consecutive year in 2007, according to real estate broker Citi Habitats.

The tight apartment supply caused rents to rise 5.5 percent on the most expensive residential market in the U.S., Bloomberg said.

With that kind of demand, landlords can call all the shots–and do:

  • Qualifying for an apartment can be tricky. New York landlords only want residents who make 40 times the monthly rent amount, according to the Times–which, for a $2,000 apartment, would be an $80,000 annual salary. The average 2006 recent grad salary? According to census data, $35,6000.
  • Roommates may not even help. Many renters take on roommates to help buffer the high rent cost–but while some landlords will take the combined incomes of several roommates, some won’t.
  • Co-signer requirements are even stricter. If a renter doesn’t make 40 times their rent, a guarantor–such as a parent–needs to step in. The guarantor must make 80 times the monthly rent amount.

Once you qualify, getting into the unit isn’t cheap. First, there’s a security deposit, which can be the first and last month’s rent–which in New York, can be $6,000 for that $3,000-a-month place we mentioned earlier.

Many renters also must pay a broker’s fee; it can cost more than $10,000 just to get inside your new unit.

Some landlords and apartment brokers may find the market is changing due to sites like Craigslist, which offers no-fee and fee-based broker listings. But Alicia Schwartz, director of howtorentinnyc.com, doesn’t think the broker system will become obsolete.

“At the height of the rental season, landlord listings change from hour
to hour,” she told the Times. “And the only ones who talk to landlords hour to
hour are brokers, not listing services.”

New York’s housing market has fared better than much of the country; although some of the boroughs recently saw price declines, across the city, home prices rose 28 percent earlier this year, according to the Real Estate Board of New York.

But the city isn’t immune to the national credit crisis. As mortgages become harder to get and less residents are able to buy, the city’s rental market is likely to strengthen–and space will always be at a premium in Manhattan.

True, New York is a unique rental housing example; but are there things we all could learn from the way its property owners and managers do business?