(Image credit: Getty Images)
https://www.bbc.com-By Bryan Lufkin
In major cities across the globe, including New York City, rent prices have gone through the roof. It’s putting the squeeze on some renters in unmanageable ways.
Earlier this year, 25-year-old Lauren Odioso was living with three roommates in a three-bedroom flat in northern Manhattan. But when the rent soared in April from $2,600 (£2,075) per month to $5,200, it was too much for the actress to afford.
“My personal current monthly rent would have gone from $866 to $1,733 – almost a $900 increase. My first reaction was shock, and then immediately realising that renewing my lease here was not an option,” she says. “I felt pretty angry and helpless.”
Odioso, who bartended in addition to acting, and worked at Starbucks throughout Covid, says she “was already struggling with money after working only service industry jobs throughout the pandemic, and with increased prices in utilities and everyday life in the city”. But in May, the financial burden became too much: she left New York altogether, and moved to the cheaper city of Cleveland, Ohio, where she now lives with her boyfriend.
For months, New York City rents have exploded, after dipping to all-time lows amid the pandemic. This has left thousands of renters adrift – and many of them are barely able to financially survive. And this isn’t just limited to major metropolitan centres like New York City: across the US, rents rose a record 11.3% last year. The alarming trend is also on the rise in many cities worldwide. The biggest problem? Experts and analysts fear it may only to get worse from here.
Double or nothing
There are several reasons why so many renters across the globe are facing a crisis of skyrocketing rent.
In New York, London and other cities, many apartments simply sat empty as renters ended leases to ride out lockdowns in more spacious suburbs; for example, New York’s population plunged more than 4% due to a pandemic exodus – forcing rents to plummet and leaving landlords scrambling. By late 2020 and early 2021, many in New York were showering prospective renters with perks, like slashed monthly rents, several months for free, waived broker fees or other bonuses.
This is how Shea Long, a software developer, found himself able to live without roommates by the time he turned 30. He moved into a one-bedroom in midtown Manhattan early last year, and paid $2,150 per month rent. He was aware he was getting a deal as part of a mass move by landlords to discount rents amid the pandemic, to keep tenants in place while many others fled the city at its Covid-19 peak.
Then, in April 2022, when he logged into the online payment portal like usual to submit rent, a message popped up: starting in June, he’ll be paying $3,650 (£2,912).
The new price tag of his rent is a reality he doesn’t want to swallow, of course – but Long feels he may have no choice but to stay, once he accounts for all the costs of moving, a new security deposit, first month’s rent and more. He also wants to avoid the intense anxiety of trying to find a new place that’s even available, as inventory is the lowest it’s been in New York City since the 2008 financial crisis. “It’s not really worth it to go through all the stress” if all those costs are barely cheaper than his 60% rent increase, he says. “Right now, I’m considering getting a roommate again, because this is just eating into my 401(k)” retirement savings.
Long’s conundrum is one many New Yorkers are facing, since re-locating to a cheaper flat now isn’t as simple as browsing real-estate listings. Renters are often finding themselves financially and logistically unable to move from their flats if they want to stay in the city, putting them in unavoidable positions that are squeezing them beyond their means.
This has also been the case for 29-year-old account manager Andy Ward, who moved into a Brooklyn studio last year and had been paying $2,100 per month, with one month free, as a pandemic incentive. But in April 2022, when Ward got an automated email asking him to e-sign his lease renewal agreement, he was greeted with news he now must pay an extra $400 each month.
Sam Chandan, professor of finance at New York University in New York City, and director of its Center for Real Estate Finance Research, says the renters most feeling the squeeze are those in ‘workforce housing’, or “the rents that are affordable and attainable for the teacher, the fireman, the policeman”. So, not only are they unable to stay in their current flat, they could be displaced out of the city altogether. And while big-city living has always favoured the wealthy, some worry this crisis could force out working-class renters, potentially meaning only a certain privileged class of people will be able to live in major cities.
‘They’re not budging at all’
These rent spikes are unlike any a city like New York has seen, experts say. “The pace of rent increases has really run ahead of anything that we’ve seen in recent memory,” says Chandan. “In many cases, rents have risen faster than the median family income.”
What’s mostly driving that rise is that more people have flocked back to cities in huge droves worldwide, explains Chandan; for instance, more people are moving to New York City now than they did before the pandemic. According to local government, office buildings and schools re-opening played a big role in people relocating to New York, as did the arts and entertainment scene, like Broadway, bouncing back.
If their current tenant isn’t able or willing to pay what the landlord is asking for, they know that someone out there will – Josh Clark
“The pendulum has swung. We went from really robust rent growth prior to the pandemic, then to a drop-off and now a rebound.” Rents have grown, inventory has shrunk and competition has stiffened. There simply aren’t enough spaces to go around, and flats will go to the highest and fastest bidder.
Inflation is also a factor, say experts, since this economic phenomenon drives up housing prices, which prevents would-be homeowners from buying a home. As a result, they keep renting, which can keep rental inventory low and rents high.
And now, the usual tactics renters typically have at their disposal to strike deals with landlords don’t really apply in this atmosphere.
“Under normal circumstances, a landlord will always prefer to keep a trustworthy tenant rather than leave their unit vacant for weeks or months and go through the process of finding someone new, and potentially paying for a broker to help them,” says Josh Clark, senior economist at Zillow, a US-based real estate listings company. But “now, if their current tenant isn’t able or willing to pay what the landlord is asking for, they know that someone out there will. The extra legwork to find a new tenant is worth it.”
When Ward sought advice for how to manage his rent hike on a New York City Facebook group, he says the overwhelming advice was “you have to haggle”. He did, but is not making headway with his landlords: “they’re not budging at all,” he says. When Ward asked why the rent was going up so much, he says “the rationale I keep getting is just because, point blank, ‘this is the marketplace standard'”.
Like Long, Ward has weighed the costs of moving versus the costs of staying, and he’s decided he has no choice but to stay put and swallow the price increase. “I don’t have the money to move” right now, he says. “I’m kind of trapped.”
What’s happening next
And it seems like rents will just keep going up. US mortgage loan company Fannie Mae predicted in a March survey that 67% of renters in the US will see their rents keep rising in 2022.
To better protect renters, Chandan says more needs to be done on the policy level, although that’s often an uphill climb: for instance, Berlin passed a law in 2020 that capped rents, yet Germany’s high court swiftly struck it down a year later, deeming it unconstitutional.
But since he believes this is a supply and demand issue, Chandan adds another solution is to convert all of that office space that’s sat empty for two years into housing. While such a move is expensive and lengthy for cities like New York, researchers estimate it could create as many 14,000 new apartments; the city had taken similar measures with emptied offices in Lower Manhattan in the years following 9/11.
For now, Odioso, now in her new home in Ohio, says many of the people she knows back in New York City who haven’t yet been hit with rent hikes are waiting for the other shoe to drop. “Many of my friends and co-workers are going through the same thing,” moving out of Manhattan or out of New York completely, she says. “My friends who haven’t had to renew their leases yet are anxious to find out the damage.”