Finding a new apartment to rent can be a slog. And with over half of US renters already paying more than 30% of their income — the standard threshold — it is clear there’s an affordability crisis.
Beyond the cost, in many places it is hard to even find apartments to rent, especially in dense Northeastern cities like New York and Boston, where building new housing is very difficult. In cities like these, just the expense of securing an apartment can cost thousands of dollars, even before the rent comes into play.
In New York City, the rental vacancy rate, which is the share of habitable unoccupied units, has dropped to a record low 1.4%. That’s according to a report released February 8, which has been produced every three years since 1965 by the New York City Department of Housing Preservation and Development. The survey was conducted between January and June 2023.
In Boston, the rental vacancy rate was a very tight 2.6% at the end of last year, according to the Census Bureau. Both cities have some of the highest median rental prices in the nation. Renters in the Boston region will pay a median rent of $2,955 a month for an apartment with two bedrooms or smaller, while those in the greater New York area pay $2,817 a month, according to Realtor.com. Both cities saw rent jump by more than 6% in January from a year ago.
The latest rental vacancy rate in New York City, as tracked by the city’s housing department, is dramatically lower than the 4.5% pandemic rate, which may have been higher because many tenants fled the city. However, the most recent vacancy rate is also lower than the more typical 3.6% from prior to the pandemic.
And the availability of apartments is even tighter for lower priced apartments, hurting lower-income households already struggling to pay rent. The report found that of the households in New York City earning $25,000 or less, who did not live in public housing or report having a voucher, 86% were severely rent burdened, meaning they paid over half of their income to rent.
Lower vacancy rates favor landlords and often lead to higher rents. Higher vacancy rates favor renters and can lead to price stability — and sometimes cheaper rents.
The main way to lower rents is to expand the housing supply, which is hard to do in dense urban areas.
The historically low vacancy rate highlights the dramatic need for more homes in New York City, especially for lower income New Yorkers, said Maria Torres-Springer, deputy mayor for housing, economic development and workforce.
High cost of moving keeps renters in place
In cities like New York, a renter typically pays $10,000 to find and secure an apartment, up nearly 30% from before the pandemic, according to research from StreetEasy. That includes first and last month’s rent plus a broker’s fee. Those expenses can be cost prohibitive, locking renters into their current homes and reducing the number of new rentals coming to market.
For a typical New Yorker with a median household income of $74,694, the cost to move would eat up 14% of their annual income, before rent, the study found.
This does not include additional costs like pet fees, amenity fees, or move-in fees.
In New York City, the typical rental broker’s fee can range from being equal to one month’s rent to 15% of the annual rent. On a typical $4,000-a-month one-bedroom apartment in Manhattan, for example, the broker’s fee alone could range from $4,000 to $7,200.
And broker’s fees can swing higher — in tandem with the price of rent — when there is more competition among renters.
However, there are so-called “no-fee” listings available, which means a broker is not attached and that the fee is not necessary. According to StreetEasy, about half of the listings in New York City are “no-fee,” but those listings tend to be in higher-end, more expensive buildings.
Last year, the average upfront cost for a no-fee listing was $8,576, according to StreetEasy.
Vacancy rates are improving for some renters
Nationally, the rental vacancy rate is improving after hitting a pandemic low of 5.6% in late 2021, according to the US Census Bureau. In the fourth quarter of 2023, the rental vacancy rate was 6.6%.
While the Northeast has seen lower vacancy rates and higher prices, nationally, the price of rent has been slowly falling as the rental vacancy rate increases. This is mostly due to a surge in the construction of multifamily rental buildings in other parts of the country, particularly in the South.
“Due to more than a decade of underbuilding, a significant shortage of housing options led to America’s housing affordability crisis,” said Orphe Divounguy, a senior economist at Zillow, in a statement. “In the rental market, apartment rent growth has cooled — partly due to a large increase in the supply of apartment buildings.”
The nation’s highest rental vacancy rate of 8.7% is found in Southern states, while the densely packed Northeast has the lowest vacancy rate, 4.3%, according to the US Census Bureau.
However, in Austin, Texas, an influx of tech and film companies has brought in new residents over the past decades, creating a low vacancy rate and higher rental prices. But that’s begun to change after a boom in the construction of multifamily buildings in the past few years has made more housing available in the area.
In 2023 there were an estimated 18,000 new units available, the highest anticipated in the market’s history, according to Matthews Real Estate Investment Services. And there are about 42,000 units underway in response to Austin’s overall population growth of 2.7%. As a result, the median rent dropped 5.4% in December from the year before, to $1,546, according to Realtor.com.
The change nationwide comes even as the influx of new residents continues. Last year there were 44.3 million renter households in the US — about 34% of all US households — according to the Joint Center for Housing Studies of Harvard University.
About 317,000 new renter households entered the market in 2023, just above pre-pandemic renter growth trends, according to the study.
“Rising apartment vacancy is not due to fewer renters but rather due to the oversupply of construction in the past three years,” said Lawrence Yun, chief economist at the National Association of Realtors.
While the increase in multifamily building over the past couple of years has been welcome news to renters across the country, it’s starting to slow down. High costs of building and elevated interest rates for construction loans continue to be headwinds for developers.
Construction starts on new multifamily buildings were down nearly 40% in January from a year ago, according to the Census Bureau. And new permits for multifamily construction were down 27% during the same time.
For now, developers are pulling back on more construction, at least temporarily, due to oversupply in some areas, said Yun.
