Fearing Plunging Rents, NYC Landlords Keep Apartments Off Market

NEW YORK CITY — Ian Tice knows firsthand the coronavirus pandemic has been a great time to rent in New York City.

Deals on apartments were so enticing that Tice, a tech worker, was willing to give up the most elusive of city dwellings: a rent-controlled one-bedroom.

Tice in February moved from a small, run-down Lower East Side apartment to a new place in the East Village with more modern appliances, an updated bathroom, outdoor space and an in-unit washer and dryer for $200 more.

“It’s not nothing obviously, but it’s in the price range of the old apartment,” he said.

"I kind of thought it was a last chance to get a real good deal,” he said.

How long this "last chance" for New York City renters will last is an open question. Many landlords are holding out hope — and their apartments — that it won't be for much longer.

More than 50 percent of unrented apartments in Manhattan are being kept off the market, according to UrbanDigs data.

That means for every deal like Tice scored, there's another would-be deal simply not being offered.

The practice of holding onto unrented apartments is called "warehousing" and it hit record levels during the pandemic. It's a sign landlords are waiting for prices to go back up in their favor, said John Walkup, co-founder of UrbanDigs.

"If you’re a renter you want to strike while the iron is hot and that time is right now," he said.

But it's also a gamble for landlords that could actually drive prices down further and ultimately bottom out the market in New York City.

Coronavirus reshapes rental market

Apartment shoppers in New York City could find the hunt for a new place has changed forever.

Renting apartments in the city followed a strict pattern before the coronavirus pandemic, Walkup said. Leases would typically start and stop in summer to coincide with school schedules and jobs that began in the fall, he said.

"This practice had gone on since immemorial and then COVID hit,” he said.

The coronavirus pandemic in 2020 shook the rental market to its foundation. Many prospective renters simply left the city for good, and their leases generally all expired between May and August, Walkup said.

Landlords started offering concessions — a free month of rent here, a waived parking fee there — to entice renters back, Walkup said. But with a glut of unrented apartments across the city, it was only a matter of time before rents dropped too, he said.

And drop they did.

Asking rents dropped by 20 percent or more in Manhattan and Brooklyn, according to UrbanDigs data. Rents are still astronomically higher than what's considered reasonable in most other cities, but for New York City tenants, they're steals.

The problem is landlords consider the prices unsustainable, especially if they're locked into years-long leases, Walkup said.

So landlords started socking away empty apartments. The percentage of "warehoused" apartments in the city pre-COVID was typically 20 to 25 percent, Walkup said.

But between July and August that went up significantly, UrbanDigs data shows.

"The market was so saturated they were pulling things off basically as fast as they came back on,” he said.

Walkup said this wasn't a collective effort — individual landlords each came to the same business decision separately. He said they're now offering a bare minimum of apartments to cover their immediate expenses.

Off-market apartments are now just over 50 percent, UrbanDigs data shows.

'A moral issue'

Allia Mohamed knows better than most what New York City renters are saying, and she wants to know if they're seeing landlords keep apartments off the market.

Mohamed is the CEO and co-founder of openigloo, an app that allows tenants to review and rate apartments and landlords. She said a future app update will collect comments on how many empty apartments are in buildings.

Warehousing isn't illegal, but it "doesn't feel good," she said.

"It’s a moral issue, it’s definitely bad for renters because New York has always had a problem with vacancy," she said.

But still, Mohamed said renters have more leverage than ever in one of the most expensive markets in the country. She noted that concessions on apartments remain high and prices, though ticking slightly up, remain low.

"I think we’re definitely going to see them tick upwards but definitely not up to pre-pandemic prices in the next year," she said.

Walkup likewise said things likely won't change much for the next six months to a year.

"I think it looks a lot better for renters than it does for landlords,” he said.

Tice, meanwhile, is sitting pretty — his lease lasts for the next two years.

He didn't feel good places were in short supply during his apartment hunt, despite learning many were likely kept off the market.

And, like Mohamed, he noted a shift in the dynamic between renters and brokers and landlords.

“This time around it was very casual,” he said. “I don’t want to say something mean, but the brokers were maybe nicer to renters.”