Manhattan Landlords Take Apartments Off Market During Rental Slump
Reduced demand during pandemic sent median rental prices down sharply; some bet market will rebound in spring
Manhattan landlords are pulling unrented apartments off the market at an unusually elevated rate, tightening inventory while rents are low and, in some neighborhoods, still falling.
The practice, sometimes known as “warehousing,” has come under greater scrutiny from housing advocates and lawmakers in recent years.
Critics charge that removing units from the market creates an artificial scarcity that worsens the city’s housing shortage.
Landlords say the decision to warehouse is a necessary response to both regulatory and economic changes, including heightened tenant eviction protections during the pandemic.
Building owners removed 1,814 apartment listings in Manhattan last month, according to real-estate data analytics company UrbanDigs. That’s more than three times the number of apartments landlords removed from the market in February of 2020.
Reduced demand for Manhattan apartments during the pandemic sent median rental prices down more than 17% for the year ending in December, according to a report from appraisal firm Miller Samuel and real-estate brokerage Douglas Elliman.
Rent concessions of up to 25% off the previous year’s rent have become common at luxury buildings, and tenants say they have more negotiating power in new leases than they ever had before.
The sharp increase in warehousing peaked last summer, when rents first began declining amid a wave of people leaving the city for the suburbs and rural areas.
Landlords removed 5,563 unrented apartments from the market in August alone, UrbanDigs data shows.
Some degree of apartment warehousing was to be expected, brokers said. It makes less sense for a landlord to list and show all of their vacant apartments when demand is down and fewer apartments are leasing at a time.
But many landlords now might be warehousing units to avoid signing deeply discounted long-term leases.
They could be betting on a potential price rebound during the spring and summer leasing season, when the Covid-19 vaccine should become more accessible, said John Walkup, cofounder of UrbanDigs.
“Some are calculating they can rent just enough of their units to cover their monthly expenses, but then let’s take the rest and put them up for rent in a bit of a stronger market,” he said.
One Manhattan landlord who spoke on condition of anonymity said eviction moratoriums, in addition to falling rental prices, were a second factor in his decision to warehouse roughly 15% of apartments in two buildings he owns in the Lower East Side.
Not only would the landlord have to offer a heavy discount on rent to get a new tenant, but under the eviction moratorium, the tenant could potentially stop paying rent for an indefinite period.
“You’re kind of taking a double risk,” the landlord said, “so if you can afford to, why wouldn’t you just wait it out?”
Some politicians have criticized warehousing, saying the practice throttles the city’s housing supply, props up prices and further strains the city’s affordability problem.
State Assembly member Linda Rosenthal (D., Manhattan) last year proposed a law to fine landlords who warehouse apartments for more than three months.
Ms. Rosenthal says she plans to introduce a new version of the bill this year.
“There is a crisis in the city,” she said. “I think it is unconscionable that some landlords are keeping units off the market, and are just, you know, sitting with their arms crossed waiting for rents to go up.”