Comment by cuuupid
1 day ago
The average 2br rent for the last 2 years was $4,536
The average for the last month is is $5,738
This is a 25%+ increase, let's say around 10% of that can be accounted for via seasonal increases.
The almost certain incoming mayor has pushed for rent stabilization/control/freeze. Let's assume this restricts increases to 10% Y/Y similar to cities like Seattle, this would cause at least a 5% recessionary pressure for housing suppliers.
The big question - is the increase due to greed among the supply (i.e. this pressure is good for the market), due to existing market pressures (i.e. this pressure may cause a wider recession in the housing market), or due to a bubble (i.e. this pressure may pop it, for better or worse)?
Some of it has to do with the FARE bill making broker fees illegal. That should account for a 5% of the increase.
NYC has negligible vacancy rates and airbnbs are already illegal. Sounds like a supply problem. The supply problem gets clearer when you realize how quickly the jersey side has grown. It's because NYC has no supply.
I have no proof for this, but lots of influencer types, nepo babies and people with remote jobs moved to NY during covid and didn't leave. NY Metro population never saw a covid dip, has been steadily growing and RTO mandates are probably causing suburbanites to consider moving back into the city. We are seeing price increases from a repressed real estate market that's finally making bank from the supply crunch.
Compare NYC metro area to SF metro area. NYC saw smaller covid drop, larger subsequent pct growth and a much much larger absolute growth rate. Rent control won't fix anything. They need to start approving market-rate housing at a mad rate. Austin is a great reference.
[1] https://www.macrotrends.net/global-metrics/cities/23083/new-...
[2] https://www.macrotrends.net/global-metrics/cities/23130/san-...
Just to piggyback some info onto the FARE Act that the NYC City Council passed because I think it's interesting when talking about the second-order effects of some regulations.
For those of you who aren't familiar with this Act, NYC has been an outlier in the US where the tenant would pay a broker fee to rent apartments that were listed by a broker. The odd thing about it has been that it's not the tenant who would historically "hire" the broker, but instead the landlord/owner. And the benefit to the landlord/owner is obvious: they didn't need to expend any resources/energy to market the property for lease and then once a tenant was found the tenant would take care of paying for the broker's efforts through a fee that would range from, say, 8% up to 15% or more of the annual lease rate (e.g., $3000 per month apartment minimum fee would be $3k and sometimes a multiple of that if the broker could get away with it). With the FARE Act this practice where the landlord hired the broker and the tenant pays the fee was banned. You may see where this is going...
For some reason, the NYC City Council thought (and still does think because you can't admit a potential mistake) that the landlord was going to now eat the broker's fee without raising the rent to offset that additional cost. So far? Landlords are not eating the fee and instead are raising the rents. And the worst of it is that the broker fee was always a one-time fee meaning that if the tenant stayed in place they wouldn't be paying the fee again upon lease renewal. Now? The tenant is paying the increased rent to offset the landlord having to pay the fee and that is now the baseline of all future rent increases.
Still early days for the FARE Act, but any reasonable person would've understood that landlords would not eat the broker fee and that this would cause an overnight increase in rents, which... it did (literally overnight once the Act was in effect).
This is all true, but removing the broker fees and replacing it with a rent hike is still better for the market overall, since the broker fees simply artificially dampen liquidity. You only paid them when you moved into a new place, but that meant that if you are stuck with a crappy landlord you might not move out because the marginal cost of moving anywhere else in NYC is much higher.
> For those of you who aren't familiar with this Act, NYC has been an outlier in the US where the tenant would pay a broker fee to rent apartments that were listed by a broker.
It might be unusual in US, but it is a standard thing in Russia: a tenant pays the fee and landlord pays nothing. I always thought it was the same everywhere. However, when selling the property then the seller pays the fee.
As for high prices, isn't it caused by the fact that everybody wants to live there but there is not enough properties for everyone? If the rent in place A is 3 times higher than in place B it means that people want to live in A and whoever lives in B is there only because they cannot afford living in A.
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Thanks for adding context. On the balance, I think it's a good bill.
Like tariffs, all taxes are eventually paid by the customer. But landlords are more capable of applying price pressure on brokers than random renters. It incentivizes landlords to hand out longer leases, which gives renters more security and fewer avenues for eviction. Won't be surprised if a software company (like streeteasy) takes over the ops side of the brokering business and drives the per-sale price waay down. Seems like an obvious startup idea.
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Certain units in NYC (about 1mm) are always rent stabilized. They’re rent stabilized because that was the agreement the developer made when getting permissions to build the apartments or more likely because they took advantage of tax abatements and benefits that required a certain percentage of rent stabilized apartments.
Mamdani’s stated policy is to set the y/y increase in rent for already stabilized apartments to 0% as opposed to the 3% average over the past 4 years. And in recent interviews he also has clarified he’s only promising it for the first year to counteract historically high rent increases over the past few years and subsequent years will be addressed like they always are, based on an analysis of the rental market.
Btw, the rent freeze was done at least 3 times in the 2010s with a 0% increase y/y, so this is not even new policy.
That’s all fair context, but rent stabilization as a policy goal has real trade-offs. Freezing rents might offer short-term relief, but long term it disincentivizes new construction.
For most Mamdani policies you can find a closely corresponding Bloomberg policy. The man is not a Molotov-throwing revolutionary.
The issue is their track record. No one believes election campaign promises.
Bloomberg is a centi-billionaire with a track record of loving the free market. His mayoral terms were known for fiscal discipline (vs social welfare spending), hard-on-crime stances (vs. abolish police) and a strong focus on data driven outcomes (vs. intent).
Mamdani is a member of the DSA, which has a track record of being anti-business (Amazon HQ2), pro-regulation (making housing expensive) and pro-union (IMO, NYC unions are a cartel keeping housing & transit more expensive than they need to be).
On paper, they might endorse similar policies, but politicians are judged by their track record and immediate association.
You still have to explain the elite freakout, if he's just Bloomberg Lite. His tone is important. He's getting people used to the idea that they can ask for these things, and that politicians can run on them without obfuscating, for fear of the always-anti-socialist crowd. He's shifting the Overton window.
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> let's say around 10% of that can be accounted for via seasonal increases.
Summer inflation is much more than that
theres alot of wealthy people in NYC and its only increasing. in neighborhoods like west village or soho, the majority of people are not working corporate jobs. they are paying 7.5-20k a month in rent out of their pockets.