Rental inventory is improving after a resurgence in renter demand drained inventory last year. In December 2022, there were 25,865 available rental units, 2.6% higher than one year ago. This improvement follows a 1.5% year-over-year increase in November, the first annual growth in inventory since May 2021, as renter demand continues to cool.
However, current inventory levels are still too low to deliver meaningful relief to NYC renters. Typical asking rents declined slightly by 0.2% month-over-month to $3,331 in December, based on the StreetEasy Rent Index, but were still up 14% from a year ago. That’s almost double the national annual rent growth of 7.4% in December, according to the latest rental report from StreetEasy’s parent company, Zillow.
NYC Homes for Sale Under $1M on StreetEasy Article continues below
Soaring Rents Make It Harder to Save for a Down Payment
The sharp jump in mortgage rates since early 2022 has put downward pressure on rental inventory and contributed to sharp growth in rents. Higher mortgage rates have diminished the purchasing power of would-be home buyers by making monthly mortgage payments more expensive. But for priced-out buyers, waiting in market-rate rentals can also be costly, as elevated rents make it significantly more challenging to save up for a down payment.
The latest StreetEasy data shows that, after paying rent, it would take 18 years for an NYC renter earning median wages to save for a 20% down payment on a median-priced home in the city ($999,000 as of December). Assuming a household of two individuals both earning the median wage, it would take only five years to save for a median-priced home. This is assuming the renter earns the annual median wage in NYC in Q1 2022 of $62,820, according to the NY Department of Labor; pays the citywide median asking rent as of December 2022 of $3,400 per month; and saves half their remaining wages after paying rent. Additionally, the renter’s annual wages and monthly rent are assumed to remain the same. In 2021, it would have taken the same renter 12 years to save up for a down payment on a median-priced home, as the median asking rent was 21% lower at the time.
That said, the choice between renting and buying is deeply personal with many factors to consider, such as one’s current financial situation and long-term goals. For many, the upfront costs of buying – including down payment and closing costs, which could take several years to recoup – seem daunting. Instead, the flexibility of renting can be appealing, and it can be the more affordable option as well. With rent-controlled and rent-stabilized units comprising 47% (1.03 million) of all occupied rental units (2.17 million) in the city, according to the 2021 NYC Housing Vacancy Survey, it is often more affordable for New Yorkers living in these units to continue renting.
Concessions and Discounts are Making a Comeback
New Yorkers are showing increased flexibility when it comes to where to move in response to soaring rents and mortgage rates. In our list of 10 Neighborhoods to Watch in 2023, the east side of Manhattan with walking-distance commutes, neighborhoods farther into Brooklyn with more space, and central Queens neighborhoods with the right balance between affordability and proximity to Manhattan all saw strong jumps in demand from both buyers and renters.
As more New Yorkers look beyond traditionally sought-after neighborhoods to find a home that fits their lifestyle and budget, rent growth is cooling in these otherwise in-demand areas. For example, year-over-year growth in median asking rents in the West Village and Greenwich Village, the two most-searched Manhattan neighborhoods on StreetEasy for the past six years, slowed to 12% and 10% in December, respectively, after an annual growth of 30% last summer. Consequently, more landlords are offering discounts on rental units. In December, 17.9% of rental listings in NYC cut asking rents – 6.8 percentage points higher than December 2021. Discounts were most prevalent in Manhattan, where about one in five (21.1%) rental listings cut asking rents during December – 5.7 percentage points higher than a year ago.
Manhattan Rentals Under $3,000 on StreetEasy Article continues below
Of the five neighborhoods where renters are most likely to find a discount, four are in Manhattan: Nolita, Flatiron District, Chelsea, and the East Village. The top neighborhood where renters are most likely to find a discount is Greenpoint, Brooklyn, where about one in three (32.6%) rental listings cut asking rents in December 2022. These five neighborhoods have also seen strong increases in asking rents since early 2020, as units that were discounted during the pandemic returned to market rates. Renters can check metrics like shares of rentals with discounts/concessions and median asking rents for their neighborhoods on the StreetEasy Data Dashboard.
Concessions have also made a comeback in NYC as landlords readjust their expectations after last year’s competitive rental market. In December 2022, 15% of rental listings citywide offered at least one month of free rent, returning to the same level as December 2021. When competition among renters reached a peak last summer, the share of concessions dropped to 6.9%, the lowest level since 2015. By comparison, an average of 14% of rental inventory each month offered concessions in 2019.
Landlords in Queens offered the lowest share of concessions. In December, 13.9% of Queens rental listings advertised concessions on StreetEasy. Concessions were most common in Manhattan, where 15.8% of listings offered at least one month of free rent.
Brooklyn Rentals Under $3,000 on StreetEasy Article continues below
What Should NYC Renters Expect?
Rising inventory, in addition to increasing shares of rental listings cutting asking rents and offering concessions, means some reprieve for NYC renters. While still close to an all-time high, asking rents will continue to decline this year as the rental market continues to rebalance. At a minimum, renters can expect a less competitive rental market this spring and summer compared to 2022.