Sharing a space with roommates can lead to large savings, but StreetEasy data suggests today’s NYC renters are prioritizing finding their own place – even if it means paying higher rents.
The number of inquiries each rental listing received on StreetEasy – a proxy for renter demand – showed that studio and one-bedroom listings are still highly sought after, while demand for rental listings with two or more bedrooms slowed rapidly after a strong surge this summer. This dip in demand for larger rentals is unexpected in a market where the citywide asking rent is up 18% from one year ago to $3,353, based on the StreetEasy Rent Index.
Demand for rentals in NYC plummeted in 2020 due to the pandemic, but came roaring back in 2021 as the city reopened. Since then, studio and one-bedroom apartments have soared in popularity, reflecting an unwavering interest in privacy and personal space. At its peak this summer, demand for these units was up more than 200% – more than triple the demand in January 2021, when it fell to its lowest point in the pandemic.
With the summer moving season behind us, renter demand has cooled in recent months, but New Yorkers looking for their own place still face stiff competition. In October, studio and one-bedroom listings received 100% more inquiries on average than January 2021, and received 1.5 times more inquiries than listings with two or more bedrooms. Demand for listings with two or more bedrooms has cooled more quickly since the summer, though is still up 62% from January 2021.
New Yorkers’ Desire for Their Own Space Contributed to Soaring Rents
With more New Yorkers looking to live without roommates, competition for studio and one-bedroom homes has grown fierce over the past year, with landlords receiving twice as many inquiries in October this year than January 2021. The StreetEasy Rent Index, which tracks asking rents of all repeatedly listed units on StreetEasy, indicates rent growth among studio and one-bedroom homes continues to outpace rent growth among homes with two or more bedrooms since the rapid recovery in demand in January 2021. Asking rents for studios and one-bedroom rentals rose 18.1% year-over-year to $2,962 in October this year. By comparison, rents for homes with two or more bedrooms rose 17% year-over-year to $3,668. The gap was wider this summer: rent growth among studio and one-bedroom homes peaked at 20.1% in July, outpacing rent growth among two or more bedroom homes by 1.7 percentage points.
The opportunity cost of privacy is substantial. Based on rents in October, living with a roommate in a two-bedroom apartment instead of living alone in a studio or one-bedroom unit results in an annual savings of $14,900 per person. Living with two roommates in a home with three bedrooms reduces annual rent costs by $20,300 per person. New Yorkers’ willingness to pay at least $14,900 in additional rent each year reflects an increased desire for personal space as more people work from home.
“One of the main issues for roommates in today’s market is finding enough personal space which allows them to work comfortably from home,” says James Finelli, an NYC real estate agent with Compass and StreetEasy Expert. “As many renters are still working or studying remotely in a larger capacity than prior to COVID, it has become a necessity to fit a desk and have more privacy in their bedroom. And as most shared apartments can be very space prohibitive, many renters have opted to find their own studio or one bedroom that does not pose the same challenges.”
Low Inventory of Studios and One Bedrooms Adding Even More Pressure on Rents
In addition, renters in the market for studio and one-bedroom listings now have less than half as many listings to choose from compared to January 2021. Partly due to strong demand, the inventory of studio and one-bedroom homes for rent has collapsed by 61% and 56% respectively since January 2021. Inventory shortages suggest a sharp drop in rent beyond a seasonal decline in the winter is unlikely.
The continued strong rent growth among studio and one-bedroom homes suggests that these segments of the rental market will take longer to cool down, despite less overall affordability. When rents increase sharply, renters are usually more incentivized to live with roommates or family members to share the financial burden, which can open up more units for others to rent. However, as our data shows, many New Yorkers are instead choosing to pay up for their own place.
Manhattan Studios and 1BRs Under $3,000 on StreetEasy Article continues below
Renters With the Financial Means Can Find Opportunities in the Sales Market
For renters who are financially prepared for homeownership, the current market environment could present the best buying opportunity since 2020 as the fierce competition for homes gradually cools. Due to slowing sales, NYC inventory continued to rise in October, increasing 3.5% from September to 18,953 units. The median days on market for an NYC home was 77 in October, up 13 days from one year ago and up 11 days from the peak summer home shopping season this year. Buyers now can take the time to find a home that better suits their wants and needs, rather than rushing into a deal.
Looking ahead, asking prices are unlikely to fall sharply, as would-be sellers – unwilling to trade in their low mortgage rates for today’s much higher rates – are retreating from the market. The number of new listings in October dropped 16.9% year-over-year, a steeper decline than the 6.7% year-over-year decrease in September.
There was no evidence of widespread price drops in NYC despite cooling buyer demand. The StreetEasy Price Index suggests closing prices in Manhattan and Brooklyn remained stable in October – falling 0.1% and 0.2% respectively from the previous month – while prices in Queens rose by 1.1%.
NYC Homes Under $1.2M on StreetEasy Article continues below
What Should NYC Renters Expect?
Renters joining the market this winter are faced with tough choices. A silver lining is that, adjusting for seasonal fluctuations, the share of rental listings that cut asking rents rose further to 18.5% in October – the highest since the pandemic – from 17.6% in September. The share of rental listings offering concessions of at least one month of free rent rose to 11.5% in October, rebounding from its seven-year low of 6.8% in July. Waiting a few months may lead to more affordable opportunities, but seasonal declines in rental inventory during the winter months may limit available options.
Rising shares of rental listings cutting prices and offering concessions suggests a rebalancing is still underway, but at a much slower pace than many New Yorkers had hoped for. NYC renters are still faced with historically high market rents and fierce competition. Although rent growth has plateaued, the median asking rent of all rental listings on StreetEasy in October was $3,500, just $50 less than the record high of $3,550 in August. For many New Yorkers faced with rising costs of living outpacing wage growth, it may take a while to be able to afford more rental inventory without spending a large share of their income on rent.
