by: elizabeth a. harris new york times march 27, 2009
TRANSCRIPT
By: Elizabeth A. HarrisNew York TimesMarch 27, 2009
According to the February Manhattan Rental Market Report, rents are down throughout Manhattan
The biggest drop was in studio apartments in doorman buildings, which have fallen 8.33 percent from the same time last year
Many people who signed leases in the bubble years are paying much more in rent than what their apartments would get today
So when their leases expire, some New Yorkers are trading up for better deals finding comparable places for less money or nicer apartments that do not come with a big rent increase
Georgia Kaporis, an associate broker at Citi Habitats says that renters are not willing to pay more because they can find better deals next door or down the block
Owners are even accepting renters with poor credit
In February, the average rent for a one-bedroom apartment in a non-doorman building was $2,632, according to the Real Estate Group. It was $3,395 for a one-bedroom in a doorman building.
Broker fees which could total 15% of the first years rent are being paid by some owners to attracts renters
According to Halstead Properties, out of 4,230 listings for apartments between Feb. 15 and March 15, 30% offered owner payment of the broker fee. Over the same period in 2008, only 8% offered that incentive
Whitney Pettyjohn and her 19-year-old sister, Chelsey, moved to Brooklyn last August
The best deal they could find in their price range was a two-bedroom in Bushwick with unreliable heat
Rent was $1700 a month When they looked again this year, they found
an apartment closer to the subway with more storage and character for the same price
“We’re one block from the subway,” Ms. Pettyjohn, 24, said. “It’s like living in a dream!”
Last year, Liz Sterling paid $1800 per month to live within walking distance from work
After moving in, she discovered the apartment had some quirks, including little sunlight, the smell of greasy meat from the restaurant below (Ms. Sterling does not eat meat) and an acupuncture parlor down the hall that stayed open very, very late and served a male clientele.
At the end of her lease, she inquired about a reduction and was denied, so she moved.
The one-bedroom she rented was listed for $2400, but was vacant for a while and the landlord agreed to a 2-year lease for $1700/month
The rental market is out of equilibrium As landlord face increasing vacancy rates
and less demand for apartments, rents are adjusting downward
Incentives are offered to attract tenants People are able to move because housing
costs relative to income are lower
h
c
L = u1 (c1, h) + D u2 (c2, h) +
1 (y - c1 - p1 h) +
2 (y - c2 - p2 h)
MUy1 (MRS1 – p1) = -MUy
2 (MRS2 – p2)
Housing and income are constant, but consumption changes because housing costs relative to income has decreased.
Point A shows the new consumption bundle from incentives, lower rent
A
y increase
Effects
Owners paid broker fees and other incentives act as a rent subsidy
People are downsizing their housing costs Even though income hasn’t changed and
moving costs are not zero, utility is higher for those who move
People are able to move to suit their preferences => Tiebout
Renters are in a better position to negotiate terms because of the Housing Bubble
Is this a sign that the housing market might be rebounding?
Are landlords able to lower rents due to expected capital gains?
Is = (i + t + d – g + e) changing too? How will the falling rents affect the supply
of housing? Are there other shocks that could be
causing the rent decline?