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In a Renter’s Market, Tenants Rush to Upgrade Their Neighborhoods

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It’s finally a renter’s market. But for how long?

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Fernando Urdapilleta always wanted to live on the Upper West Side of Manhattan but could never afford the rent — that is, until now.

When his then landlord offered Urdapilleta a free month of rent if he renewed his existing lease in Lenox Hill, he sensed the market was finally shifting in his favor. Rather than take the deal, Urdapilleta looked for Upper West Side apartments and found a two-bedroom right off Central Park for almost $200 less than it rented for pre-pandemic. After negotiating, he got a month and a half of free rent.

“I saw a ton of great options, better than what I had and for less money,” he said. “The place I moved to, there’s a ton of natural light and I’m right in front of the park, and that’s wonderful for me and my dog.”

Urdapilleta’s dream apartment is part of a larger domino effect that’s playing out in the housing market. While the “urban exodus” headlines are overblown, the shake-up began in March when a number of Manhattanites did leave the city, leading to a rise in vacant apartments and once-unthinkable rent drops. Since the real-estate market opened back up in June, people chasing deals are moving within New York City — leaving new vacancies (and declining rents) behind them.

With unemployment up, and many people working remotely, the rent market might not return to its old ruthlessness anytime soon. “I see this as some sort of reset, an improvement in affordability,” said Jonathan Miller of the appraisal firm Miller Samuel.

While Manhattan’s rent drops are being framed in some parts of the media as somehow indicative of the abrupt end of Manhattan’s glory days, in reality, they are fairly minor — the year-over-year median rent drop in August was 3.9 percent — and they ultimately present an opportunity for renters who are still gainfully employed to upgrade to a neighborhood that was previously unaffordable. This creates another vacancy in their old neighborhood, and so forth, putting pressure on prices down the food chain.

Meanwhile, there is a question of how much longer this will go on. Housing-market data is starting to show evidence that the small wave of outbound migration from Manhattan has passed its peak. According to Miller, new contracts across the tristate region have fallen month over month, meaning the suburb boom is not booming as hard as it was a few months ago. At the same time, new rental-leasing activity in the city is rising back to pre-COVID levels, meaning those vacancies left behind in Manhattan are starting to get filled (although rental inventory in the city remains highly elevated compared to a year ago). New leases in Manhattan for August were down 23.7 percent year over year, which is a lot, but the number of new leases has risen considerably since the whopping 70.8 percent decline in April. As rents continue to fall, the natural progression of supply and demand will fill the vacancies and return leasing activity to its pre-pandemic levels, but at lower prices.

“The tables turned,” Urdapilleta said. “Before, I had a rough time trying to secure an apartment. Now, landlords and brokers were fighting over me and throwing in months for free. Some New Yorkers are just taking advantage of that right now.”