Is Congestion Pricing Prompting New Renters to Look Outside Zone?

The rental landscape in Manhattan took a slight dip in February, fueled by dips in many downtown neighborhoods, even while Brooklyn and Queens rental prices soared.

While it may be too early to tell if the dip fueled by lower asking prices downtown is an aberration or the start of a trend, at least one realtor is already cashing in by advertising apartments he handles on the UES under an “avoid the congestion zone” heading. “I got a tremendous response,” said Glenn Bennett, a realtor with Nest Seekers.

Bennett noted, “‘if I just put one bedroom apartment with a view’ Well, that’s pretty much everybody’s advertising one bedroom apartment with a view. So I’m watching the news, and they’re talking about the congestion pricing. So I figured, you know what, let me put the words, ‘avoid congestion pricing,’ because you’ll be living above the zone and see what happens.”

The result? "I got a much larger response than I normally would have gotten,” he said.

According to a year-over-year analysis published on March 13 by Street Easy, a real estate blog owned by listings giant Zillow, in contrast to Queens and Brooklyn, where rental prices have risen significantly, Manhattan saw an overall decrease of about 4.6 percent in rental prices in Feb.

The drop was noticeable downtown, even if prices remain stubbornly high, over $4,000/month in many downtown neighborhoods. In Battery Park City, Street Easy said rental prices tumbled double digits, down 12.7 percent, but it was still averaging $4,895, making it among the highest priced neighborhood in the survey. The Upper West Side, where only the lower part of the neighborhood would be within the zone, still saw asking prices decline 4.1 percent to $4,295 in February, Street Easy found.

Similarly, in Downtown Manhattan, the median asking rent declined two percent year-over-year to $4,850.

Greenwich Village saw a decline of 7.6 percent, with rents averaging $3,995. Gramercy Park witnessed a 5.9 percent decrease, with rents averaging $4,585. The Lower East Side had a decrease of 4.6 percent, with rents averaging $4,100.

Borough president Mark Levine is not swayed by the one-month dip. “The trend is quite clear, even if there’s some fluctuation month by month,” Levine said. “Rents are at historic highs. And we need major policy action. Or we’re going to price out a whole generation of Manhattanites,” Levine said.

Tight demand usually translates into escalating prices. And there is no doubt demand is tight. The city’s housing and vacancy survey, which is conducted every three years, said on Feb. 8, that the vacancy rate of 1.4 percent in 2023 was an historic low.

“We’re now averaging over $5,000 a month on market rate apartments,” Levine said, “And it is devastating for low-income families, working-class families. It’s pushing people out of the borough. It’s pushing people into homelessness. It is a challenge for young people who want to move out of their family’s home to find their own place. It’s a problem we have to fix. And it’s my number one priority,” Levine said.

The market for affordable housing shows an even tighter market, he said. “If you look at lower-end and less expensive apartments, for example, those priced at $1,100 per month or below, the vacancy rate is 0.39 percent,” Levine said. “This gives a lot of power to landlords because tenants have to compete for apartments, driving up rent prices. We would prefer a situation where landlords are competing for tenants. But for that to happen, we’re going to have to create a lot more housing.”

The situation is especially dire for those seeking affordable housing, as homes priced below $2,400 per month—considered modest by New York City standards—are exceedingly scarce. With such limited options available, a 3.39 percent vacancy rate in high-cost homes, a multitude of hopeful renters find themselves vying for the same handful of properties, intensifying the competition and worsening the housing crunch.

In addition to the shortage of available rental homes, New Yorkers are also facing increasing financial challenges due to rising costs and living expenses, resulting in high rent burdens, missed payments, and a growing number of households struggling with economic insecurities. The report states that low-income New Yorkers spend more than 30 percent of their income on rent.

City legislators and Mayor Adams have called on Albany to give landlords and developers more incentive to build with tax breaks and relaxed zoning laws. But the housing questions have not been resolved at the state level yet and are being cited in reports as a big reason the state has failed to meet the state budget by the April 1 deadline.

“We are currently observing a slowdown in housing development of all kinds,” said Levine. “Specifically, we are not witnessing enough new affordable housing developments being constructed,” he said. “We recently had a wonderful building opening in Inwood with 174 deeply affordable units, and it received 80,000 applications. This scenario is not uncommon. Clearly, we are nowhere near meeting the need for affordable housing,” Levine said.

What is even more remarkable is the surge unfolding in Upper Manhattan, where neighborhoods such as Harlem, Washington Heights, and Inwood are experiencing a staggering 7.5 percent increase, bringing the median rent to $2,900, according to Street Easy.

Inwood has seen a significant 17 percent increase compared to the previous year, with the median rent hitting $2,975. Rent prices in Washington Heights remain unchanged compared to the previous year, with average rents ranging from $2,048 for studios to $3,277 for 4-bedroom units, according to Zumper.

Zumper uses data comprising an extensive number of listings, sourced from both proprietary listings posted by landlords and brokers through Zumper’s Landlord Platform, as well as third-party listings obtained from MLS providers.

Rent prices have surged across the following neighborhoods: Upper East Side, Central Park, East Harlem, Central Harlem, and West Harlem, according to Zumper as of March 15, 2024.

The Upper East Side saw a recent 5 percent uptick in rent prices last month while Central Park area experienced an astonishing 83 percent surge in the last month alone. East Harlem bared a significant 65 percent rise compared to last year, while Central Harlem and West Harlem also saw substantial increases of 38 percent and 69 percent, respectively.

Will the split between uptown hikes and downtown dips widen and turn into a real, long-term trend? “I don’t know if it’s coincidental or just timing,” said Bennett at Nest Seekers, “but I guess time will tell once the congestion pricing does kick in.”