Manhattan Apartment Prices May Be High... But It Could Be Worse for NY Apartment Seekers
The November report on Manhattan and Brooklyn rental apartments released last week showed that the trend toward higher rents, lower vacancies and fewer concessions continues unabated. In fact, Manhattan apartment prices are up from November last year by anywhere from 5 to a harrowing 18 percent in the case of two-bedroom rental apartments in non-doorman buildings.
All told: the average price increase, year-over-year, in Manhattan rental apartments is about $660 a month. The news is slightly better for seekers of Brooklyn rental apartments, where rents in Bushwick, for instance, for two-bedroom rental apartments, are down; and even in DUMBO prices are lower, by as much as $250 a month on the mean one-bedroom rental apartment, though at $3,400, it's still no bargain.
That said, the news could be worse for NYC rental apartments seekers, if a trend in the rental market on the west coast is any indication of the future here in the east.
According to an article over the weekend in The New York Times, the demand for rental apartments in San Francisco is so high right now, and the supply so law, that landlords have taken to charging application fees to combat (and profit from) the mountain of paperwork that's arriving with each listing.
A quick look in early November on Craigslist San Francisco revealed that fees for applying for a rental apartment currently range from $20 to $45, though landlords clearly don't always mention such fees in their listings. According to one rental apartment seeker over the summer, 15 of the 20 apartments he saw required a upfront fee to apply, though some witheld the charge until he became a "finalist".
Needless to say, this increasingly prevalent policy in San Francisco can get expensive in a hurry for those hunting for rental apartments. It's a windfall for owners, though: one landlord claimed to have received 250 applications for a $3,500 a month loft in the Mission district, and at $40 a pop, that's a quick $10,000 just for letting people look!
Now, application fees are nothing new in NYC (even during a "down" market), and we've even see "goodwill" deposits required when applying for an apartment to make sure you're serious about renting it if approved. We've also seen landlords collect multiple applications, and we've seen landlords who temporarily take units off the market when they get an application.
But the issue apparently in San Francisco is not the fee itself, so much as the number of people applying for each apartment (sometimes in the hundreds, if reports can be believed), and the fact that all but one application will be approved. In theory, you could apply for 20 apartments (and pay an application fee), and never get selected just from the sheer volume of applicants, not because of your credit score, etc.
Also of potential interest to NYC rental apartment seekers is the use of "revenue management software" for determining annual rental increases by landlords across the country. The programs come in a few different guises, including Rainmaker LRO (stands for "lease rent options") and RealPage Inc., but the principle is the same: designed like the software used to price airline tickets and hotel rooms, these programs weigh dozens of short- and long-term variables--from competitors’ rental rates to market conditions to seasonal trends--and spit out the highest rent a landlord can feasibly get away with charging for any apartment at any given time.
Relatively few residents of NYC apartments live in a home in which a computer is in charge of raising their rent--one of the country's largest publicly-traded apartment owners, Equity Residential, uses Rainmaker LRO on only 8,290 units in the New York metro area, with less than half of those being rental apartments in the city itself.
However, clearly the trend here is heading toward an increasingly rents-by-robots future, with even smaller landlords investing in the technology in cities across America, asking their computers to determine the ideal rental prices and occupancy rates on their properties in order to maximize revenue.