Jul 29, 2022 - Economy

The mystery of NYC’s high rents, solved (sort of)

Illustration of a luggage cart carrying apartments, a house, and high-rises.

Illustration: Lindsey Bailey/Axios

Even as economic storm clouds gather and the housing market craters, the rent is still too damn high across several metropolitan regions.

Driving the news: Rumors of New York City’s demise aren't entirely exaggerated, especially as soaring crime and remote work reshapes its culture. But rent inflation has yet to come back to earth.

  • Zumper data shows the average price of a 1-bedroom apartment is almost $3800, more than double the national average.
  • According to data from analytics firm Placer.ai, Manhattan’s population dipped by 1.3% in June when compared to 2019, with Brooklyn – a hipster redoubt – down by nearly 4% over the comparable period.

Why it matters: In theory, the pandemic-era exodus from both coasts to the Sunbelt region should have cooled demand for rentals and tamed prices. In actuality, the Big Apple is offering virtually no relief to renters at all income levels. And believe it or not, there are some plausible explanations why.

  • Washington D.C. is nearly as bad: Rent.com data shows rent prices jumping across the board (thoughts and prayers for anyone seeking a 3-bedroom, where costs are up an eye-watering 55%).

It’s not just New York: Zumper shows prices spiking in “in every major city in both Tennessee and North Carolina,” two states that absorbed people who fled big cities during the pandemic.

What they’re saying: Lior Rachmany, CEO and Founder of Dumbo Moving in NYC, has executed over 100,000 moves since the onset of COVID-19. About 65% of those were out of the Big Apple, which has fallen to around 50% currently.

  • Last year, “many people decided to go to states without state income tax like FL and TX,” Rachmany told Axios, mirroring the migration out of California’s metropolitan cities.
  • An additional wave of working-class residents, looking for better opportunities in other regions, have also bolted the city.

So with all that migration, why is apartment inventory still so scarce, and rents so high? Rachmany has an answer, and it lies in New York’s reputation for being an aspirational city for people from all walks of life.

  • “...A lot of young professionals after graduating school are choosing NYC over other cities, trying to pursue their dreams here,” he tells Axios. For example, over 80% of graduates of New York’s public universities are opting to remain in-state, data shows.
  • “NYC is still the #1 place to move, we see a great rent of young professionals moving out of Chicago, Philadelphia, Boston into NYC,” Rachmany added – pushing up demand for rentals.

The bottom line: “Most New Yorkers can’t afford [these rents], and what’s available is not available anymore. In terms of renters, whoever is looking to rent is not a good place to be right now, the market is very high and [there is] not a lot of inventory,” Rachmany added.

  • “New York is still going to be New York, still a number one choice for young professionals out of grad schools.”
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