Are NYC rents falling? They aren’t yet, but rising discounts are a sign of shrinking demand, and an indicator that rents could fall soon. (Getty Images)
Amid the COVID-19 pandemic, New York City rentals at all price ranges are seeing larger and more frequent discounts — cuts to the rent made after the unit is advertised on StreetEasy. While these rent cuts are increasing across the city, in May, they were most common in the pricey, central areas of Manhattan, and on studio units. With many New Yorkers working from home during the pandemic, renters are seeking more space and are less concerned about being close to offices and entertainment. Others are leaving the city altogether. The growth in rental discounts is a strong indication that demand for apartments in NYC is declining overall. Though they’ve been rising for years, we could see NYC rents falling soon.
Why Rising Discounts Could Lead to NYC Rents Falling
The monthly cost of an apartment in NYC has reached record highs in recent years. It even ticked up slightly this May, rising 0.7% in Manhattan, 3.7% in Brooklyn, and 2.3% in Queens. However, this uptick accompanied far more dramatic increases in rent cuts: Fully 24% of NYC rentals received a discount in May, compared to 14.9% at the same time last year. And the size of the discount rose, too, from 4.8% of the median asking rent last year to 7.9% this May.
Growth in rental discounts like this is where any change in the market would likely appear first. Naturally, landlords list apartments for what they expect the market to bear, based on recent conditions. Lagging interest in the unit at the expected price is an indication of a changing market — and a prompt for the landlord to offer a discount. Over time, as landlords rent more units at discounted rates and get a fuller picture of the market, they adjust initial asking rents downward.
Discounts Grow Across Neighborhoods and Price Points
In an in-depth analysis of rental discounts, StreetEasy found that rent cuts have grown across Manhattan, Brooklyn, and Queens, but are most significant in larger buildings, smaller units, and the borough of Manhattan.
While rent cuts are most frequent on units priced between $2,000 and $5,000, the good news for renters is that more homes are discounted at nearly all price ranges. Discounts are, however, rarer for apartments under $2,000, as affordability remains a priority in this time of economic uncertainty.
Pricey Parts of Manhattan See the Biggest Rent Cuts
In Manhattan, more than 1 in 4 rentals got a discount in May 2020 — the highest portion in the city.
Pricey central neighborhoods felt the biggest impact, with more than a third of advertised rentals in the Financial District, Midtown West, Flatiron, and the Upper West Side getting a discount in May 2020, compared to no more than 18% in May 2019. Since many landlords in these areas are struggling to rent units without offering a deal, they’ll likely soon start listing them at a lower price to begin with.
Hover over the map below to see the share of rental discounts in each neighborhood.
With many New Yorkers working from home, retreating to places outside the city this summer, or leaving permanently due to job loss, living close to Manhattan offices has simply become a less popular priority. COVID-19 has upended the typical trading of home space for close proximity to work and entertainment. Instead, many are choosing to get more space and greater affordability farther from the city center.
Downtown Brooklyn and Long Island City Lead the Boroughs in Discounts
Though not as prevalent as in Manhattan, discounts have increased in the outer boroughs as well. In Downtown Brooklyn and Long Island City, 39% and 21% of rentals, respectively, were discounted in May 2020, compared to 22% and 10% in May 2019.
Manhattan and Brooklyn Studios and 1BRs Under $2,300 on StreetEasy Article continues below
Renters looking for apartments with amenities like in-unit laundry and upgraded appliances may score a good deal in these neighborhoods. Keep in mind, however, that one reason demand may be falling in these buildings is that renters do not want to pay extra for shared building amenities like pools, rooftop decks, and gyms.
Where to Find Rental Deals: Studio Units and Larger Buildings
As many New Yorkers spend more time at home, they’re prioritizing having a more spacious apartment. While all apartment sizes saw more frequent discounts in May, studios received the highest share by far, with 27% across NYC getting a rent cut, compared to just 14% in May 2019. Once again, this is an indicator of weakening demand for these units.
Discounts increased across apartment buildings of all sizes, but rentals in larger buildings are offering the best deals. In May, 27% of rentals in buildings with 50 or more units were discounted at a median of nearly $400, or almost 10% off the asking rent. That’s double what renters saved on apartments in large buildings last year, when only 15% of rentals in large buildings were discounted at a median discount of $196. The prevalence of price cuts in larger buildings and studio units is one reason why Downtown Brooklyn and Long Island City are seeing more rental discounts.
Summer Will Likely See More Units But Less Demand
The growing frequency of rent cuts today suggests that the market favors the renter over the landlord — in other words, that there’s more supply than demand.
Manhattan, Brooklyn, and Queens 2BRs Under $2,500 on StreetEasy Article continues below
The summer months are when the greatest number of NYC leases begin and end, meaning the supply of rentals is likely to grow even further. Meanwhile, demand will likely continue to fall as new hires and interns start their jobs remotely rather than in NYC, and many New Yorkers leave the city temporarily or permanently. Eventually, the mismatch between supply and demand will trigger falling rents in NYC.
Should NYC Renters Sign a Lease Now, or Wait?
The data discussed here only covers apartments that advertised a discount on StreetEasy. Landlords of many other units may be open to discounts even if they haven’t indicated it publicly. Regardless whether a unit received an advertised discount or not, it’s always a good idea to negotiate further before signing a lease. And if there is an advertised discount, that’s a sign of a motivated landlord.
For renters whose leases are up later in 2020, don’t worry: The growth in discounts now suggests that rent levels could decline through the year. The COVID-19 pandemic has changed the landscape for NYC apartments, with falling rents a likely result.
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