What Landlords Privately Think About the Real-Estate Boom
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Rental bidding wars, 70 percent rent increases, and the lowest vacancy rate in 14 years: What does a landlord think?
A year ago, property owners were doing anything they could to woo tenants: paying broker’s fees, offering multiple months of free rent, even giving away Pelotons. In February 2021, the Manhattan vacancy rate stood at 11.79 percent. Within a few months, everything changed. As people flocked to the city last spring in anticipation of a reopening that never really happened, the vacancy rate plummeted and the rental market turned brutally competitive. Renters started reporting increases of 50, 60, and even 70 percent on lease renewals. Desirable apartments now receive hundreds of inquiries. There are lines around the block at open houses and baseline 15 percent broker fees. Bidding wars, unheard of until last year, now happen in nearly a quarter of Brooklyn and Manhattan apartments, according to the latest Douglas Elliman market report. Net effective median rents in Manhattan, whose rental market was battered by the pandemic more than any other in New York, hit their highest level ever — $4,000 a month — in May. The Manhattan vacancy rate is down to 1.77 percent.
Renters have reacted with disbelief, despair, confusion, and TikTok videos. We are, after all, still living through a pandemic.
But we’ve heard very little from the landlords. Are they gleeful that they once again have the upper hand? Unapologetic about renting market-rate apartments for market rents? Guilt-ridden but ready to make up for 2020 and then some? We talked to three landlords — one on the Upper West Side, one in the West Village, and one who operates in Brooklyn and Queens as well as the northern suburbs — who agreed to speak anonymously about these frenzied conditions.
I have all smaller buildings, two-, four-, and some six-family buildings, in Brooklyn and Queens — Ridgewood, Bushwick, Red Hook, and one in Park Slope. I also have some buildings in northern Westchester. I probably have about 75 units right now. A huge landlord would probably be seeing things in a different way — they don’t even know their tenants, and rent increases are very automatic.
Empty apartments vs. occupied ones
When I’ve gotten vacancies, I’ve been going up about 20 percent above what my rents were pre-COVID — but that’s 20 percent after three years, and my rents tend to be pretty low. I tend not to raise tenants much or at all: Five percent is pretty much what I’ve been looking at this year. I call people and say your rents are going up — one guy who’d signed a two-year lease during COVID said, “Wow. I never expected this.” I was like, “What are you talking about? Five percent after two years is not even in line with rent-stabilized leases.” He’s re-signing, but he acted like it was crazy.
COVID-era deals and anti-landlord sentiment
As a landlord, COVID has been frustrating. People stopped paying rent and there was this sense, because it’s your home, when times get tough, you shouldn’t be expected to pay. Every person who stopped paying me during COVID managed to keep their cell phone on, their electric, their high-speed internet. But real estate, that’s different? Inflation was 8 or 9 percent last year, water bills keep going up. When I have to replace a dishwasher or make a repair, it all flows through, and yet there is this sense that landlords should just have to deal with it.
Even with the Emergency Rental Assistance Program, when the government paid back rent — often not in full — they said, “Now you can’t raise the rent for a year.” Why? You as the federal government took my livelihood during COVID, and whether I agree with it or not, when the smoke cleared, why can’t rents go up? Because housing is a human right and I shouldn’t be in business?
The whole world seems to think that being a landlord is not something you should do for a living. It’s so insanely anti-landlord it’s almost funny. People on the streets, “Cancel rent.” What does that mean? Sure. Cancel rent. What does that mean? Cancel grocery costs. If it’s, “Oh, real estate shouldn’t be a business,” then let government do it. In my estimation, they do a bad job, and no one at the end of the day wants government running their housing. Yet they don’t want landlords to be landlords as a business. Where does that leave anything? It’s a strange time.
Renting out apartments during COVID
One vacancy I had recently was in Park Slope: It went from $4,000 to $4,850 a month. It’s a garden duplex, but it’s really only a legal one-bed, one-and-a-half-bath, technically. But it’s very nice. Central AC, I refinished the original stone wall. My apartments tend to be unique, not remotely cookie-cutter. I rented it in two days, so I don’t even know what I could have really gotten. Everything I’ve had come up has gone really quickly, which probably means I didn’t price them high enough.
This particular unit, I arrived to do a showing and my tenant had just moved out, so there was no electricity, no lights, and the place was in shambles. Nothing ever looks good right after someone moves out — they’d lived there for six years and there was furniture left in the unit that they were going to move out shortly, so the place looked lousy. I was like, Why am I even here? I can’t show this. Then the couple I was showing it to arrives and says, “We love it, we’ll take it.”
That’s what it was like showing apartments before the internet or before StreetEasy. When I was renting off Craigslist, if people showed up and they liked it, they’d take it. But with StreetEasy, they’d say, “Wow, we love it, but we have another ten places to see.” Now it’s gone back. When people show up, they’ve already lost three apartments and they want to lock it down.
Tenants negotiate the best deal they can
The market is insane and the narrative is, “The landlord is bad, landlords are jacking rents up.” But let me tell you, landlords got crushed during COVID. And when the bubble burst in ’08, don’t think tenants didn’t call me up and say, “Hey, I expect a rent reduction because the market is down.” I didn’t have a single tenant say, “I’m worried you’re having a hard time and I’m fine at the rent I’m paying.” My cost of buying is going to go up substantially — where is that money supposed to come from?
I have a tenant who, when I was renewing her lease last summer, said, “I see you have this other unit on StreetEasy and I want it at the same price.” Well, that other unit just rerented for a 20 percent increase. I’m so ready to call that woman up and say, “Ready to play the StreetEasy game again? You wanted the same rent as that unit last year? Well, now it’s 20 percent higher. You pegged yourself to apartment 2R — I didn’t do that, you did. I’m willing to sign a document saying from now on, you can pay whatever 2R pays, whether it’s up or down.” Her lease is up in July. I 100 percent am going to do that.
Honestly, why shouldn’t I? If that’s the market? Because I’m supposed to be a good guy? But last year, when I was dying and the ERAP checks hadn’t come in or anything else and I was drowning, she looked at me and said, “I’m going to get my piece.” Now, me doing the exact same thing, when it’s a feeding frenzy out there? There were 20 responses in a day to the vacant apartment in her building. It’s $3,650 for a three-bed in Bushwick, which is not that much in this market. Why shouldn’t I charge what I can charge? Doesn’t that sound nasty, though? But isn’t that weird? This is how I make my living, so why is it any less valid than any other business? Because allegedly I can afford not to?
My husband and his family have two buildings on the Upper West Side, ten apartments each, all one-bedrooms. It’s a mix of rent-stabilized and free-market apartments, which is super important to this discussion. The legal rents I’m collecting on the rent-stabilized portion of the rent roll are so far below market they’re not covering expenses, so the market units are heavily subsidizing those below-market rents.
Pre-COVID, our average stabilized rent was $1,250 and our average free-market rents would be in the mid-to-high two-thousands. The shortest tenancy I have for a rent-stabilized apartment is 30 years. I have tenants who have been there 50-plus years.
The math on rent hikes
Rent increases are always a judgment call: How long have they been there? Do I think I can get an increase? Is an increase reasonable at this time? In one of the buildings, I’d sent out lease renewals to three tenants before COVID with a $75 increase. All renewed, and the leases were signed pre-COVID. When COVID came along, I reached out to the woman who does our leasing and said, “I don’t think this increase is appropriate.” She said, “You’re the only landlord I’ve heard saying that.” I think it paid off the next year. There was so much vacancy, I sent them lease renewals with no change. They all stayed.
The other building was different. The leases were coming up in June 2020, COVID had already gripped the city, and I had to offer discounts. One woman was self-employed and she was very concerned. Pre-COVID, she was paying $3,150. So we agreed to a lower number, $3,000, and in addition to that gave her three months of a $200 or $300 credit. The next year we offered her a lease renewal of $2,800 and she countered with $2,700, which we happily accepted — I didn’t counteroffer. Now I’m about ready to extend a lease renewal to her. At a minimum, I need to be back to that pre-COVID number, $3,150.
I keep hearing people talking about, “Oh, my rent went up $500.” But what I’m not hearing is what they were paying in February 2020. What are the discounts they got during COVID? I don’t think the numbers are as crazy as you hear. If you got something at a 20 percent discount, a 3 percent increase isn’t unreasonable. You take your savings when you get your savings.
The COVID Landlord Assistance Program
During the two years when landlords were operating during COVID, they had serious issues. There were many owners who had empty apartments they weren’t able to fill. Others had tenants who weren’t able to pay, people working at restaurants whose jobs just disappeared. And then you had the worst kind of person who was working and just followed the “cancel rent” rhetoric. I know a landlord in the Bronx, the tenant didn’t pay for seven or nine months — one day, handed back the key and said, “I’m buying a house.”
When owners share those stories, they are vilified or discounted as outliers, but you hear them all the time. The way they created the rental-relief program allowed the bad actors to take advantage. The people who really needed the help, who were working in industries where their employment evaporated overnight and were struggling, living paycheck to paycheck and may have had a language barrier or lacked the technology skills to apply, probably have not gotten the relief, which means the owner did not get the relief. On the other hand, I know many owners who got Landlord Rental Assistance Program relief for tenants who were working. It was a failed system.
Doing the math as a landlord
I think the bigger numbers you’re reading about are the higher-end buildings with lots of amenities. Someone I know moved into one of those super-luxury buildings downtown in December 2020. He took a 14-month lease and got three months of free rent — his contract rent was $3,195, but it came out to $2,510 for a one-bedroom. Now his rent is $3,754 — an increase of 17.5 percent on the contract rent and 50 percent on the net-effective rent. But it’s a big apartment with a fabulous view, and the apartments around him are paying $4,200 to $4,500.
From what I read, there seems to be a really high renewal rate. Not enough housing available, people feel trapped — not a word I like to use, but they don’t have options. And it’s expensive to move.
I’ve never seen our utility bills escalate like they have in the last few months. We heat with gas — typically less expensive, not anymore. Our insurance escalated last year, 48 percent. The multifamily market is paying a huge disproportionate share of the property-tax burden.
I remember last year trying to understand what was happening with our property taxes. I made an Excel spreadsheet down the block, how many units, how many rent-stabilized units. A single-family home that had been an apartment building or an SRO — their home was probably worth two, three times what ours was. Their taxes were close to $50,000 and we’re in the $80,000 to $85,000 range. Apartment buildings are paying a disproportionately high amount of taxes — and really, the renters in the buildings are paying. That’s why New York City is such a mess.
I inherited this building. My great-uncle bought it for his mother in 1919. I grew up here — when I was a child my great-uncle, two great-aunts, my grandmother, and my parents lived in the building. My great-uncle paid it off before he died, so we’ve never had a mortgage. It’s 20 units, but I live in four of them. All studios or one-bedrooms. One unit is rent-controlled and three others are rent-stabilized. A childhood friend lives in the rent-controlled unit, and I just got one of the rent-stabilized units back. It rents for $1,800. If it were market-rate, it would go for over $6,000. Most of the apartments that we got back in the 1980s and ’90s became market-rate. The rules then were that you could add a percentage of what you spent fixing up an apartment to the rent. If you did a place over nicely, that added up.
About half my tenants moved out during the pandemic. One apartment turned over twice. If they didn’t give up their apartment, they still got out of town. Even the couple in the rent-stabilized apartment, they went to their place in Hawaii for most of the pandemic and decided not to come back. Most of the rents fell by $50 to $500. When I had vacancies, I got what I could get.
I hate raising rents on existing tenants. I usually try to do it incrementally, and if people ignore the new lease I give them I usually don’t do anything at all, since it’s only $25 or $50 more a month. But I know I have to do something now. I’m probably going to raise them between 2 and 10 percent. I have two guys paying $3,900 for an apartment that was renting for $4,250 before the pandemic — it was empty for two months before renting. I’m going to try to get them to $4,200. Landlords who live in their own buildings look at things differently than landlords who have 400 units and are just paying a numbers game — for them it’s perfectly possible to say, “I’m raising your rent by this much and you can pay it or leave.”
The two most recent apartments I rented out in December 2021 and early winter 2022. The first one, the couple who had been living there was paying just under $5,000, and we put it on the market for a couple hundred over $5,000. A lot of people showed up at the open house, and there was a bidding war. I ended up renting it for $6,000 a month to a guy who lived down the street and wanted it for his daughter, a college student. There was another guy offering $6,500, but it seemed like so much, it gave me a bad feeling. I also don’t like to rent to young white straight men — they tend to have parties and be entitled and difficult. It wasn’t a prejudice I started with; it was one I got over the years living with people. But now I have trouble with the college student. She’s been partying there, people are vaping in the halls. I should have gone with the bro-y guy. But the father was so nice, and he lived right down the street.
The other unit I rented, there was also a bidding war. It had been $4,100, and I took a year to redo the kitchen and the bath. We put it on the market for $4,500 or $4,600 and I’m getting $5,750. It’s a really nice renovation — lots of cabinetry in the kitchen, and the bathtub is one of those ones you can soak in. I don’t know if I needed to do all the work to get a higher rent, though. I probably could have got that without it. But only because I waited a year to rent it.
I don’t approve of the insanely high rents right now, but I don’t think they’re only caused by landlord greed. I think they’re also caused by developers and how they’re encouraged to develop property, building only luxury apartments.
Supply and demand
In the medium times, when the rents were sort of high but stable, I would get three different good tenants to choose from sometimes, which was its own special little hell. Sometimes someone would say, “I can pay the whole year ahead of time” to make themselves more attractive, but that’s illegal now. I think the bidding wars are just because of the lack of inventory. There’s nothing on the market. That’s why rents have gone up so much. When 50 or 100 people showed up at one of my open houses, my broker and I were wondering what was going on. He looked online and discovered that there were only 11 one-beds in all of Greenwich Village in any price range.
I usually would go with the highest bidder, except that one time. Because they’re going to be my neighbors, I always like to meet them. I want to get a feeling for who they are and if there are any red flags. There was one woman who had tried to rent an apartment here before and lost out who was going to rent the one-bedroom that ended up going for $5,750. I was all ready to rent it to her, but this other woman offered significantly more money and I was like, Sorry — who knows when this will happen again?
For a number of years, it felt like the rents were static. They were highish — $4,000 to $5,000 for a one-bedroom and studios around $3,000 — but they weren’t really going up. I was getting worried because my taxes were going up $16,000 to $18,000 a year. And then everything changed. I think it will continue to be this way for a little while because people are still moving back and there seem to be so few apartments on the market. My broker was jumping up and down at me being like, “You have to raise everyone’s rents or they’re never going to move out otherwise.”
I think one of the things the rental history of this city has made clear is that people get stuck in apartments. When people stay long enough, the rent is so low people can’t afford to move.