How to Compete in New York City’s Resurgent Rental Market
(Bloomberg Opinion) -- In just a few months, the rental market in many New York City neighborhoods has flipped from stagnant to red hot.
The value of move-in incentives to entice renters in Manhattan hit the lowest in a year as of July, according to appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate. In Brooklyn, new lease signings were the highest for a July since 2008, the report said. Apartments in desirable areas of the borough such as Brooklyn Heights and Cobble Hill are often going for several hundred dollars above the asking price, or have dozens of applicants clamoring for them, sight unseen.
While the rental prices in New York City are much higher than they are in the rest of the country, it's a similar story of rental demand nationwide. The number of occupied rental units in the U.S. increased in the second quarter compared with a year earlier by the most since at least 1993, according to industry consultant RealPage Inc. Rents on newly signed leases in July also jumped to a multi-decade high.
So how can potential renters win out in an increasingly competitive market, especially in places like New York, where the rental process can be especially frustrating?
There are a few things an applicant can offer to sweeten the deal financially, but it's important to remember that simply waving more money at the outset isn't necessarily the best approach, or even allowed. Landlords want renters who are financially sound, of course, but they also want tenants who won't be high maintenance or difficult. That's especially true if renters are looking at smaller buildings or townhomes and dealing with owners directly.
Many apartments in New York City come with a hefty broker's fee, which is as much as 15% of one year's rent and typically paid by tenants. Last year, apartment owners or landlords were offering to cover the fee (even though it may have been passed onto tenants in the form of a higher rental price), but now, it's something potential renters may want to offer to split or pay. Also, note that while there was a short-lived ban on brokers' fees in New York City last year, they were ultimately deemed to be legal.
One tactic that won't work: Offering several months' rent up front. Most landlords are prohibited from accepting money in advance under their mortgage, and brokers can't ask for it, according to 2019 New York state legislation. The same goes for trying to give a larger security deposit (typically just one month's rent).
And even though it's popular, renters should think twice about submitting an application for an apartment without stepping foot inside. Deals with those renters often fall through when the tenant finally comes to see the place so landlords may be wary, says Jessica Henson, a real estate agent at Compass in New York City.
In addition to the usual financial documents, it's important in the current environment to include an introductory letter with an application, according to Vicki Negron, one of Corcoran's top Brooklyn agents.
Keep it short and don't reveal too many personal details so as not to violate the Fair Housing Act, which prohibits discrimination in housing. But references to attractive features of the apartment and prior rental experience or history as a tenant are advised.
For pet owners, it may be wise to include a reference letter from a former neighbor or pet sitter, who can vouch for its behavior.
The middle to end of August is a popular time for vacation, but those looking to rent an apartment for Sept. 1 or Oct. 1 would be smart to stay put so they can see units at a moment's notice. Be flexible on viewing times, and be open to different lease start and end dates. One broker mentioned an applicant winning out because he agreed to an 11-month lease instead of 12 months.
Potential tenants should also be mindful of how they act when touring a home. Brokers for the owner or landlord will report back on things like whether someone was considerate enough to remove shoes, or just fired questions at them about water pressure and building policies.
If prospective renters are dead set on a specific building or townhome, it's worth keeping in touch with the landlord or broker, even if they weren't selected for the initial unit. Tenants usually have to give landlords 60- or 90-days’ notice before moving out, so owners may already know what will be available this fall. If someone is a viable applicant, the landlord may just wind up renting to him or her directly rather than go through the hassle of listing the apartment.
If time is of the essence, renters may want to consider a short-term furnished rental or Airbnb until the market cools off. They may also want to re-evaluate their wish lists — maybe a washer/dryer in the unit isn't so essential — and neighborhood searches.
Finally, prospective renters may want to run the numbers to see if buying an apartment, especially with interest rates still so low, makes more financial sense. If so, they'll be in a good position to rent their homes one day and take advantage the next time the rental market is on an upswing.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Alexis Leondis is a Bloomberg Opinion columnist covering personal finance. Previously, she oversaw tax coverage for Bloomberg News.
©2021 Bloomberg L.P.