More than four years into the pandemic, the verdict is in: Gen Z loves life in New York City. And that’s hard news for renters.
The pandemic has forced old and young generations out of central business districts. Between 2021 and 2022, the promise of remote work and fewer options for access to restaurants, entertainment and other commercial spaces forced 2 million Americans to flee major urban counties, according to a study by the American Institutes of Health. Economic Innovation Group.
But some millennials and even members of Generation Z have bucked the trend and returned to America’s biggest cities — leading to New York City’s lowest vacancy rate since 1968, according to data released by the city Thursday. The share of rental properties that were vacant and available fell to 1.4% in 2023, making this Gotham’s worst housing market crisis in 50 years.
According to the data, between 2021 and 2022, more than 42% of people who moved to New York were members of Generation Z, and 39% were millennials. Census Bureau data. Moreover, major metropolitan areas as a whole, including New York City, are experiencing population losses across all generations—with the big exception of Generation Z. Today’s Homeowner Report show.
“Younger generations are certainly a significant portion of those returning to the city for its social, cultural appeal and convenience,” Jason Bordainick, co-founder and managing partner of the New York-based firm. Hudson Valley Real Estate Grouptells Luck. “Whether you work in an office or remotely, the appeal of city living, especially in Manhattan, remains strong.”
To put the situation into perspective, housing experts look at “healthyor the normal vacancy rate is between 5% and 10%. Higher vacancy rates tend to benefit tenants more than landlords. When vacancy rates are higher, it’s easier for people to find apartments, but that means landlords have to woo tenants with lower rents or other incentives.
The release of the latest jobs data has alarmed New York City leaders, many of whom are calling for more housing, especially affordable housing.
“The data is clear: the demand for living in our city far exceeds our ability to build housing,” New York City Mayor Eric Adams. says the statement. “New Yorkers need our help, and they need it now.”
A lower vacancy rate means even higher rental costs.
With vacancy rates as low as New York’s, it’s no surprise that rental prices are also sky-high. The average rent for a 700-square-foot apartment in New York City is more than $4,700, according to the agency. RentCafe, and only 1% of apartments cost less than $2,000 per month. By comparison, the average rent across the United States is just $1,700. Experts agree that the housing shortage is only exacerbating rental costs.
“The biggest factors that New York has always struggled with in terms of housing development are the high cost of land and our extremely long construction cycle,” Daniel Ash, a New York real estate lawyer, Adler and Stachenfeldtells Luck. “We have a complex regulatory environment that makes it difficult for developers to build quickly and efficiently, so the only way to encourage development is to loosen such restrictions, speed up approval rates and/or provide incentives to improve the financial performance of each project. Job.”
Low vacancy rates, high rental prices and few affordable housing options have only worsened the city’s homelessness problem. There has been a “massive influx of migrants desperate for housing, demanding city resources,” Ash says. Overall, the city needs hundreds of thousands of additional housing units to fill the housing shortage. In September 2023, Adams announced a major overhaul of New York City’s housing system that could free up space for up to 100,000 new homes in the next 15 years.
But outside of city programs, building brand new housing in New York City is not as attractive to developers because of its high costs and strict regulations.
“When it comes to building more housing, developers need financial incentives due to the exorbitant costs associated with building in New York City,” Yuh Tyng Patka, another New York real estate attorney with Adler and Stachenfeldtells Luck. “New York is a highly regulated market, and that comes at a cost to owners and developers.”
In addition to building more housing, rent control is also critical for people looking for affordable options. Although many apartments in New York City have rent controls based on income, this is not enough to make living in the city affordable for everyone.
“The current situation highlights the urgent need to re-evaluate recent rent control and regulation measures,” says Bordainik. “Some of these policies have inadvertently discouraged housing investment, exacerbating shortages. It is vital that we review policies to ensure we fully engage the private market to deliver more housing investment.”
Even with rents as high as New York’s and increased competition to even find housing, the city remains a promising place, even if in many ways it is very different from life in other metropolises across the country.
“New York is and always will be a destination for dreamers,” Patka says. “New York City will continue to see strong demand for housing for the foreseeable future. [but] lack of affordable housing [could] turn away the very talent that New York attracts that makes it such a special city.”