Business
11:50 am
Tue April 3, 2012

City Rents Rise As Buyers Wait Out Housing Bust

Originally published on Tue April 3, 2012 8:05 pm

The turmoil in the housing market over the past few years has scared a lot of people away from homeownership. That means many people who can afford to buy are now renting. With so much demand for apartments, rents are once again on the rise. And in places like New York City, they're near record highs.

A few weeks ago Lauren Weitz got her first apartment in the city. Every night when she gets home from the office, she upholds a New York City tradition.

"Go very slowly, because some of these are crooked," Weitz says, walking up the five flights of stairs to her apartment. Like countless young New Yorkers before her, Weitz lives in a walk-up.

"You're not going to run up and down the stairs, so I'm very careful with my groceries and not to carry too much heavy items," she says. "Yeah, you really have to think twice."

The apartment is a studio on the Upper West Side. That's one room with a small kitchen. To live here she pays nearly $1,700 a month, plus utilities. Morgan Turkewitz, the agent who found it for her, says Weitz got a good deal.

If the apartment were a one bedroom, Turkewitz says, the rent would be significantly higher.

"Probably somewhere in the mid-$2,000s," she speculates. "So it's expensive. Real estate in New York City is expensive."

That's putting it mildly. Rents in the city fell a bit after the 2008 financial crisis, and a lot of landlords were forced to offer incentives like a month's free rent to find tenants, but since then, rents have been slowly climbing. Gary Malin, president of the real estate firm Citi Habitats, says they are now near an all-time high.

"There's very little supply, there's lots of demand," he says. "People have been staying in the rental market longer 'cause they're not comfortable jumping into the sales market or they don't have the necessary down payments, so all of those things have been factored into a very tight and successful rental market."

That pattern is being repeated in many other parts of the country. Chris Herbert, research director of Harvard's Joint Center for Housing Studies, says rents rose more than 5 percent last year in Seattle, Chicago, Minneapolis, Boston, Pittsburgh and other cities. Herbert says the increases reflect growing demand for rental properties.

"In 2011, there was growth of a million renter households across the country, while homeowner households fell by 350,000," Herbert says. "So in one year to have growth of a million renters, that's a number we haven't seen in a long time."

Herbert says the rental market won't stay this strong indefinitely. Sooner or later people are going to get tired of paying high rents and think about buying again.

"People may decide, 'You know what? It looks like the economy's recovering. I have more confidence in the housing market, I have a job and I am paying so much in rent, I think it's time for me to jump into the homeowner market,' " Herbert says. "So that may be where the release valve comes if demand for rentals keeps going up."

In the long run, he says, developers will respond to the increased demand by building more apartments. In fact, there's evidence that's starting to happen. But it will take a while before they're built.

In the meantime, the competition for apartments in places like New York City can only grow. For her part, Weitz is happy to have found a place of her own.

"I always tell my friends that this place is pretty perfect," she says. "If it had an elevator, it would have been tops."

Copyright 2013 NPR. To see more, visit http://www.npr.org/.

Transcript

ROBERT SIEGEL, HOST:

It's ALL THINGS CONSIDERED from NPR News. I'm Robert Siegel.

AUDIE CORNISH, HOST:

And I'm Audie Cornish.

To rent or to buy? It's one of those proverbial $64,000 questions. And with all the recent housing market turmoil, a lot of people have decided to rent even if they can afford to buy a home. In fact, there's been so much demand for apartments that rents are once again on the rise.

NPR's Jim Zarroli reports from one of the hottest rental markets in New York City.

JIM ZARROLI, BYLINE: Every night when she comes home from the office, Lauren Weitz upholds a New York City tradition.

LAUREN WEITZ: Go very slowly because some of these are crooked.

(SOUNDBITE OF FOOTSTEPS)

(SOUNDBITE OF LAUGHTER)

ZARROLI: Like countless young New Yorkers before her, Weitz lives in a walk-up. A few weeks ago, she got her first apartment in the city. She has to climb five flights of stairs to reach it.

WEITZ: Yeah, you're not going to run up and down the stairs, so I'm very careful with my groceries and not to carry too much heavy items. And, yeah, you really have to think twice.

(SOUNDBITE OF LAUGHTER)

ZARROLI: The apartment is a studio on the Upper West Side, that's one room with a small kitchen. To live here, she pays nearly $1,700 a month plus utilities. And Morgan Turkewitz, the agent who found it for her, says Weitz got a good deal.

So, if this had a bedroom attached to it, if this were a one-bedroom apartment in this neighborhood, how much would she be spending?

MORGAN TURKEWITZ: Probably somewhere in the mid-2,000s. So, you know, it's expensive. Real estate in New York City is expensive.

ZARROLI: That's putting it mildly. Rents in the city fell a bit after the 2008 financial crisis, and a lot of landlords were forced to offer incentives like a month's free rent to find tenants. But since then, rents have been slowly climbing back up.

And Gary Malin, president of the real estate firm Citi Habitats, says they're now near an all-time high.

GARY MALIN: There's very little supply. There's lots of demand. People have been staying in the rental market longer because they're not comfortable jumping into the sales market. Or they don't have the necessary down payments, so all of those things have been factored into a very tight and successful rental market.

ZARROLI: That pattern is being repeated in many other parts of the country. Chris Herbert, research director of Harvard's Joint Center for Housing Studies, says rents rose more than 5 percent last year in Seattle, Chicago, Minneapolis, Boston, Pittsburgh, and other cities. Herbert says the increases reflect growing demand for rental properties.

CHRIS HERBERT: In 2011, there was growth of a million renter households across the country, while homeowner households fell by 350,000. So, in one year to have growth of a million renters, that's a number we haven't seen in a long time.

ZARROLI: Herbert says the rental market won't stay this strong indefinitely. Sooner or later, people are going to get tired of paying high rents and think about buying again.

HERBERT: People may decide, you know what, it looks like the economy is recovering. I have more confidence in the housing market. You know, I have a job and I'm paying so much in rent, I think it's time for me to jump into the homeowner market. So, that may be where the release valve comes if demand for rentals keeps going up.

ZARROLI: And in the long run, he says, developers will respond to the increased demand by building more apartments. In fact, there's evidence that's starting to happen. But it will take a while before they're built. In the meantime, the competition for apartments in places like New York City can only grow. For her part, Weitz is happy to have found a place of her own.

WEITZ: I always tell my friends that this place is pretty perfect. If it had an elevator, it would have been tops.

ZARROLI: Jim Zarroli, NPR News, New York. Transcript provided by NPR, Copyright NPR.