Broader Rental Markets Cool Off NYC’s Rental Housing Crunch Hits 50-Year Low

[Alexander Szikla]

Throughout 2023, increased apartment inventory led to more significant rent reductions, particularly in high-supply markets. Among the top 50 U.S. apartment markets, 17 with over 2.8% inventory growth experienced a 2.2% decrease in rents. Naturally, some of the COVID era high rental growth darlings such as Phoenix and Tampa have gotten caught in the mix.

Conversely, markets with low supply, including some in the Midwest, saw rent increases of over 3%. A smaller group in the West faced rent cuts due to demand challenges, while only three major markets achieved a balance between high inventory growth and rent increases. Overall, the surge in new apartment construction, introducing 440,000 units nationwide, underscored the direct inverse correlation between supply and rent growth in 2023.

It is important to note that some markets such as Miami and Detroit have shown resilience posting continued rental rate growth figures indicating a fundamental strength in those markets as well as a secular shift in American demographics.

Meanwhile, New York City stays consistent with an unprecedented housing crunch, reaching a 50-year low in rental availability. The city’s vacancy rate has plummeted to a mere 1.4%, the lowest since 1968, amidst a stark imbalance between housing supply and demand.

Despite adding 60,000 homes, the population surge of 275,000 households has left only 33,000 rental units accessible. Lower-income residents bear the brunt, with vacancies for apartments under $1,100 dropping below 0.4%. A staggering 86% of households earning under $25K spend over half their income on rent, highlighting the acute affordability crisis.

Urgent calls for policy intervention, including incentives for housing production like the potential reintroduction of the 421-a tax abatement, are echoing through the city as leaders grapple with the severity of the housing shortage.