2023 NYC Vacancy Rate Hit Lowest Level in 50 Years

The portion of rentals that were vacant and available in 2023 was a paltry 1.4 percent- the lowest level since 1968. While rental pricing has cooled over the past six months it does not appear to be for a lack of demand, or a surplus of inventory.

NYC officials consider any vacancy rate below 5 percent constitutes a housing emergency. Apart from the Covid years, NYC vacancy has remained below 5 percent for most of the past 20 years, but despite rising prices- the rate has plummeted even further after the pandemic.

?

So how did we get here and with a city-wide average rent of $3,740 per month how much more can prices rise until it becomes totally unaffordable for even the most well-heeled urban dwellers?

?

Some of the major problems facing the NYC rental market are the following:

1.??????? Lack of land

2.??????? High cost of construction

3.??????? Increasing regulation, taxes, and operating costs

4.??????? Apartment Warehousing

?

Where do we go from here?

?

The laws of supply and demand dictate that prices will keep rising and in the short term, they will. There is simply not nearly enough construction to offset the demand. What construction there is, is usually catered towards high end luxury condo development since that is the only investment vehicle that can return profits to investors with such high costs (land and construction).

?

Rental construction is largely unfeasible- especially ground up rental construction. Instead, you will get older buildings that are gut -renovated, and while this adds updated inventory to the market, it doesn’t usually add additional supply.

?

Renters and homeowners alike are being squeezed not just on housing costs but overall costs of living. Transportation, groceries, entertainment, utilities have all rose tremendously over the past few years and there doesn’t seem to be an end in sight.

?

Eventually, something will have to give. A saving grace could be the conversion of old office buildings, but once again most of these buildings will not be able to be converted to residential due to layouts, floorplans, zoning and other issues.

?

The question remains, will these obstacles be overcome to provide the city with some much needed housing, or will the cracks begin to spread and result in an exodus of talent and money leaving the market.