Rent prices in Manhattan reached an all-time high in July and August, peaking at a median price close to $4,400 per month. This has led experts to believe that prices have reached the “affordability threshold” that will make it harder to raise rents much higher without pricing most people out of the market. However, renters may soon be able to breathe a sigh of relief as a wave of new apartment construction is set to bring rents down.
Reaching The “Affordability Threshold”
In July and August, the median average rent for apartments in Manhattan reached a high of $4,370, according to brokerage firm Douglas Elliman and research firm Miller Samuel. This extraordinarily high rent is actually only about .28% above what it was in August 2022, which had previously seen 11% growth year over year. This has led some to believe that rents have reached an “affordability threshold,” meaning that rents can go no higher without becoming too expensive for renters to afford.
Lack of Available Apartments for Rent
One of the biggest contributors to reaching this affordability threshold is a lack of available apartment buildings for rent. Apartment occupancy is currently sitting at around 94%, which is good for landlords who can benefit from competition over limited space, but bad for renters seeking affordable housing. In addition, high interest rates have discouraged people from purchasing homes or condos instead of renting them, keeping people locked into leases.
Potential Relief on the Way?
There may fortunately be some relief on the way to bring rents down from the affordability threshold, in the form of increased available housing from new construction. The number of new rental units being built has reached a 50-year high, with approximately one million new units being constructed over the past three years across the United States. Unfortunately, this still is not enough to fully address the crisis, and it may be some time before prices start to come down to levels that people can more easily afford.
The Potential Impact on the Market
For renters, news of declining rent prices is greatly appreciated, given how difficult it has become to find affordable housing. Landlords, on the other hand, are not pleased to find they may need to lower rents after more than a decade of steady increases. However, with rents seemingly at an affordability threshold, there is not much room for rents to continue going up, while there is a great deal by which they may be reduced.
If you are an attorney assisting a client with a real estate transaction, you should contact the title insurers at Habitat Abstract. Our experienced staff will assist you with obtaining a title insurance policy that protects your clients and prevents unforeseen issues related to a defective title. Contact us at 1-888-99-TITLE (1-888-998-4853) or visit our contact page for more information.
