WaPo article on K-shaped recovery in housing

David Goldsmith

All Powerful Moderator
Staff member
Here in NYC I think one of the reasons that lower priced units are rising so much is artificial scarcity. Recently CHIP (a landlord advocacy group) published that its members are keeping 20,000 Rent Stabilized units off the market on purpose, implying they were holding them hostage until NY State changed the Rent Stabilization act so they could charge whatever they wanted for them. I suspect they are trying to get the official vacancy rate over 5%, the rate which in the statute will trigger an end to Rent Stabilization. Both DeBlasio and now Adams delayed the official survey of vacant units.

The Real Estate industry in NYC got themselves in this jam to begin with (i.e. Housing Stability & Tenant Protection Act of 2019) due to extreme hubris and overestimation of lobbying power in Albany, plus failure to read a shift in sentiment in both the legislature and general public. It's my opinion this is being done again because if they tried to do away with almost a million Rent Stabilized units there would be bedlam.

There have also been many non-Rent Stabilized units kept vacant on purpose since the start of the pandemic.
 

David Goldsmith

All Powerful Moderator
Staff member
I also have to question if luxury rentals in NYC are still down or has the rebound off the bottom negated that?
 

Upstairs Realty

Well-known member
I know I have been beating the drum of "it's getting harder and harder to be middle class" since before the Pandemic, but another data point: We are outgrowing our current place (an extremely large Four) and are keeping our eyes peeled for a Five and there is certainly nothing to rent in our current neighborhood, or its environs, under $7K/month. (Technically there are a couple of units that are Fives or can pretend they're Fives, but they're no bigger).
 

inonada

Well-known member
I know I have been beating the drum of "it's getting harder and harder to be middle class" since before the Pandemic, but another data point: We are outgrowing our current place (an extremely large Four) and are keeping our eyes peeled for a Five and there is certainly nothing to rent in our current neighborhood, or its environs, under $7K/month. (Technically there are a couple of units that are Fives or can pretend they're Fives, but they're no bigger).
Yah, inflation sucks. Somewhere I read that beating down inflation this time is gonna be extra hard / prolonged. Pressing the gas on already-low rates moved home prices up, which can be sticky. As rates increase and home prices remain high (even in a detente), cost of buying becomes higher, driving rental demand. Since rent / rent-equivalent is 1/3rd of inflation, pressure on inflation does not get relieved by higher rates. Eventually, it’ll kick in of course, but it’ll take time.
 

Upstairs Realty

Well-known member
@Dave good thought about the architecture of different eras. There is a nice Five at La Touraine (built 1905), but it's no bigger than where we are.
 

Upstairs Realty

Well-known member
I blame corporations: without full RTO people still want/need home offices, and the people who can afford those are the ones with high-paying jobs, so they're bidding up the price of that fifth room on the margin (by a lot; the difference between a good Four and a good Five, at least in my neighborhood, is roughly $750K).
 

David Goldsmith

All Powerful Moderator
Staff member
It's interesting that for a number of years millennials were blaming Boomers and claiming they would never be able to afford to buy houses. Then with ZIRP they not only started buying them, but in their usual YOLO gusto went all-or-nothing.

Since younger millennials weren't working yet at the time of GFC it's going to be interesting to see how they react to their first economic downturn (whenever that might occur).
 

David Goldsmith

All Powerful Moderator
Staff member
I blame corporations: without full RTO people still want/need home offices, and the people who can afford those are the ones with high-paying jobs, so they're bidding up the price of that fifth room on the margin (by a lot; the difference between a good Four and a good Five, at least in my neighborhood, is roughly $750K).
It will be interesting to see what happens to the studio market which was always geared towards the "I'm not home much anyway" crowd.
 

Upstairs Realty

Well-known member
I closed this morning (as listing broker) on a studio in 3 Hanover, so I'd say that market is currently doing just fine. We'll see whether rising rates make a difference.
 

David Goldsmith

All Powerful Moderator
Staff member
Here in NYC I think one of the reasons that lower priced units are rising so much is artificial scarcity. Recently CHIP (a landlord advocacy group) published that its members are keeping 20,000 Rent Stabilized units off the market on purpose, implying they were holding them hostage until NY State changed the Rent Stabilization act so they could charge whatever they wanted for them. I suspect they are trying to get the official vacancy rate over 5%, the rate which in the statute will trigger an end to Rent Stabilization. Both DeBlasio and now Adams delayed the official survey of vacant units.

The Real Estate industry in NYC got themselves in this jam to begin with (i.e. Housing Stability & Tenant Protection Act of 2019) due to extreme hubris and overestimation of lobbying power in Albany, plus failure to read a shift in sentiment in both the legislature and general public. It's my opinion this is being done again because if they tried to do away with almost a million Rent Stabilized units there would be bedlam.

There have also been many non-Rent Stabilized units kept vacant on purpose since the start of the pandemic.
Big spenders: Real estate lobbying spiked for rent law

Landlord outlays plunged after 2019; tenant group’s budget has ballooned​

The year 2019 was a costly one for landlords — in more ways than one.
A new report by tenant advocacy groups shows that landlords splurged on lobbying that year, then dialed it way back.

Four industry groups spent more than $4.7 million on lobbying efforts in 2019, when the state overhauled rent stabilization in tenants’ favor. That was $1.7 million more than in 2018, 2020 and 2021 combined. Their spending plunged in 2020 and flattened out in 2021 at a little more than $1.1 million each year.
In 2019, the Rent Stabilization Association spent nearly $1.4 million on lobbying; the Real Estate Board of New York spent more than $650,000; and the Community Housing Improvement Program just over $210,000.
Lobbying expenditures by landlord lobbying organizations and front groups 2018-2021 (NYS Joint Commission on Public Ethics)

Lobbying expenditures by landlord lobbying organizations 2018-2021 (Via Housing Justice for All, NYS Joint Commission on Public Ethics)
The report, by Housing Justice for All and other tenant advocacy groups, argues that the industry’s past spending likely heralds a major effort this year, as landlords push to replace tax break 421a and to stop the passage of good cause eviction.

“These lobbying groups appear primed to unleash another deluge of influence spending — seeking to turn popular opinion and the opinions of lawmakers in their favor,” the report states.
REBNY, CHIP, RSA and other groups have launched a campaign, “Homeowners for an Affordable New York,” against good cause eviction, which would give tenants a defense against eviction in housing court if their rent went up by more than 3 percent or 1.5 times the regional inflation rate, whichever is higher. The campaign has a $1.4 million lobbying contract with Fontas Advisors.
A spokesperson for the campaign was dismissive of the tenant advocates’ findings.
“We don’t put much faith into a report hastily pieced together by a lobbying organization whose leadership doesn’t see that, if pushed through the legislature, good cause eviction will do real damage to New York’s already teetering economy,” the homeowners’ spokesperson, Ross Wallenstein, said in a statement.

He argued that the measure would discourage investment in rental housing statewide, hurting both owners and tenants.
The three groups, along with a political action committee tied to them, spent a total of $7.7 million on lobbying between 2018 and 2021. The PAC, Taxpayers for an Affordable New York, spent the most, nearly $3.5 million, followed by REBNY’s $2.6 million and RSA’s $1.9 million. CHIP spent $700,421.
Vocal-NY Revenue (IRS/990s)

Vocal-NY Revenue (IRS/990s)
Meanwhile, the budget of VOCAL-NY, a pro-tenant nonprofit that finances the Upstate-Downstate Housing Alliance, nearly tripled in the four years leading up to the 2019 rent law, from $1 million in 2014 to $2.8 million in 2018, according to the organization’s tax filings.

Its spending on lobbying between 2018 and 2021 was less than $200,000, according to state records. That does not represent the full extent of tenant-focused lobbying, though, and VOCAL-NY is active on other issues besides housing.
Similarly, REBNY advocates on numerous matters other than rent stabilization, which is a focus of the RSA and CHIP. But REBNY’s budget dwarfs theirs.
The changes to rent stabilization enacted in 2019 dramatically altered the economics of nearly 1 million New York City rental units and tens of thousands outside of the city, notably by severely limiting rent increases and deregulation. Good cause eviction would provide a lesser degree of protection to tenants in the rest of the state’s rental housing.

Lobbying is just one of many factors that influenced the outcome in 2019. The seeds of the rent law reform were planted in 2018, when voters swept Republicans out of power in the state Senate. Real estate interests had heavily supported Senate Republicans and had little sway with Senate Democrats, who had spent nearly all of the previous 40 years in the political wilderness.
A consensus emerged after the law passed that tenants’ advocates had outhustled and outprepared their landlord counterparts. Owners were unexpectedly abandoned at the 11th hour by then-Gov. Andrew Cuomo, despite having donated millions of dollars to his campaigns over the years.
 

David Goldsmith

All Powerful Moderator
Staff member

New Yorkers moving in face of steep rent hikes​

Equity Residential’s renewal rate in NYC down, but new tenants filling units​

As demand for their units increases, landlords are raising rents at renewal time, prompting more tenants to walk.
Sam Zell’s Equity Residential saw its renewal rate drop 5 percentage points from the beginning of the year to 60 percent, Bloomberg reported. The lessened renewal rate is a sign renters are taking their chances on finding cheaper lodging than re-upping at a much higher rate than they initially signed on for.

The market is competitive, though, and those seeking cheaper digs are likely settling for less. Appraiser Miller Samuel and Douglas Elliman put the first-quarter vacancy rate below 2 percent, while rents surged 25 percent year-over-year.
In the New York area, Equity has hiked up rents for both renewals and new agreements. The net effective rent hike for first-quarter renewals was 21 percent, up from 14.5 percent in the fourth quarter of 2021. For new agreements, net effective pricing rose 29.7 percent.

Despite the aggressive increases, Equity isn’t sweating its search for tenants. On an earnings call, the REIT’s CEO, Mark Parrell, said the company was “easily able to attract new residents at these higher rates.”
Tenants have been scrambling following the expiration of many Covid-era bargains. Many who can’t afford steep increases are migrating to other parts of the city, while new renters arrive to fill the vacancies, giving the advantage to landlords.
“Landlords have the ball in their court,” Compass agent Carlos Aldana recently told The Real Deal. “They’re offering aggressive renewals and if that renter says no, they know that they’ll be able to achieve it elsewhere.”
Meanwhile, bidding wars accounted for one in five new lease signings last month, according to Miller Samuel. More inventory is expected to hit the market in the spring and summer.

As for Equity, it appears to be less interested in the city’s rental market than it once was. The Chicago-based REIT is looking to sell a five-building portfolio of Manhattan and Brooklyn rental buildings for more than $750 million, The Real Deal reported. Parallel said during the earnings call that the company plans to reduce its holdings in New York and Washington, D.C., although it hasn’t commented on the portfolio listing.
 

David Goldsmith

All Powerful Moderator
Staff member
I keep hearing how crazy the rental market is and how there is absolutely no product but I just opened the third email in one week announcing a broker's open house for a rental listing. What's up with that?
 

inonada

Well-known member
I get the sense that things have topped out from a couple of things I track, and that inventory is building at the higher asks w/o sufficient bids.

One star I track is rental inventory at $20K+, which is at 161. Around Q4 2021, it bottomed at ~95 and has been creeping back up slowly.

Another is Prism NYC, which used to have as low as 3 apts available but now shows 15. Worse than that, they seem to have started playing games. They have 5 studios listed, but another 5 disappeared from listing in a matter of 3 days last week. For reference, they seem to rent ~5 studios per quarter if we look at the past few quarters.
 

David Goldsmith

All Powerful Moderator
Staff member
This article lays out - as I have pointed out in the past - the shortage of available rental units in NYC is largely artificial. 42,860 Rent Stabilized units being held hostage is criminal. And the contention that they can't be brought up to code (or even the assertion that they ALL are "unrentable", out of code, etc) is preposterous.
Landlords called it: Vacancy rate jumps, rent-stabilization stays

Long-awaited survey also shows 42% jump in unusable rentals​

When Gov. Kathy Hochul extended the deadline to complete the 2021 Housing and Vacancy Survey, landlords decried the move.
They predicted the city would use the extra time — which the state said the pandemic made necessary — to wait for more renters to return, pushing vacancy rates below the 5 percent threshold required to preserve rent stabilization.

Looks like the landlords called it.
The survey, released this week, revealed a vacancy rate of 4.54 percent in 2021, above the 3.63 percent in 2017, and just below the 5 percent mark that constitutes a housing emergency and justifies rent stabilization.
Owner group the Community Housing Improvement Program initially warned that the state’s extension, which gave the city until July 2022 to publish the survey, would allow counting to continue into early 2022.

The survey’s methodology shows some of landlords’ fears were overblown. The city’s Department of Housing Preservation and Development writes that surveyors collected data from February to July 2021.
By February, vacancy rates in Manhattan had dropped to 5 percent from a pandemic high of 6.14 percent recorded in October 2020 by Jonathan Miller for Douglas Elliman. However, that February figure is a far cry from the 1.3 percent vacancy rate Miller found in February 2022.
Collection windows aside, CHIP notes that the survey highlights a more dire problem for the city: a shrinking stock of available rentals.

The survey’s vacancy figure does not include all unoccupied city units. Apartments pulled from the market for renovations or used as second homes, for example, are excluded.

So when the city tallied 103,200 vacant units, that figure excluded 353,400 apartments that it considers unavailable.
Since 2017, the number of vacant but unavailable units has surged by 42 percent.
CHIP points out that 42,860 of those apartments, about 12 percent, are rent-stabilized, have been vacant for over one year and are still cannot be rented. That’s enough to house the city’s entire homeless population.
The group contends that the Housing Stability and Tenant Protection Act of 2019, which severely curtailed owners’ ability to raise the rent, has decimated revenue streams and made it impossible for some to recover the cost of renovations.

“The law has effectively forced these units off the market,” said Jay Martin, executive director of CHIP.
To be fair, the survey does not break out the reasons rent-stabilized units are unavailable. And among all off-market units, the primary cause is occasional use: The apartment is a pied-a-terre or seasonal rental.
Still, CHIP says the sheer number of unusable, rent-stabilized apartments should be cause for concern. A separate survey the group conducted last year found at least 20,000 rent-stabilized apartments had been pulled from the market.
The city survey shows more than twice as many.
 

David Goldsmith

All Powerful Moderator
Staff member
BTW, if you look at the number of rental deals done in March vs historically, what is the explanation for price explosion? Apr22MHTrent-nnl-2048x1355.jpg
 

inonada

Well-known member
New leases are only half the equation. On the other side are lease terminations. For example, in late 2020 the number of new leases was much higher than normal, but prices fell. Why? Because the number of lease terminations spiked even higher in the run-up.

The best explanation for what’s happened, IMO, is that:

1) 2020 rents brought in tenants who would have otherwise rented a place. The “sayers” upgraded. The share renter upgraded to a studio, the studio renter to a 1BR, etc.

2) The pandemic created more demand for space. Increased time at home during the pandemic, from perma-WFH, etc.

3) The returnees came back in 2021, but the “slot” they left behind was occupied by an upgrading stayer. More demand, same supply.

4) Everyone has been flush with easy money. Asset prices pumped, stimulus / unemployment checks fat, employment high, wage inflation high, bumper year for banks and many other businesses. So they could pay for it.
 
Top