All Things Real Estate: Pandemic’s effect on our rental market

All Things Real Estate: Pandemic’s effect on our rental market
Philip Raices

Looking back over the last 3 ½ years, it’s clear the rental market has been quite astounding.

So many people exited the larger urban high-rise cities and moved out to the less crowded suburbs, creating an unheard-of massive demand for housing.  This also contributed to allowing people to work remotely and later on utilizing hybrid work environments, which caused sales prices to escalate.

This had a marked effect on rental prices due to the overwhelming demand from those who could not purchase, beyond what anyone could have anticipated or expected.

As interest rates rose from 2022-2023, more buyers decided to move into rentals, as the cost of purchasing either became absurdly expensive or there was a fear that they were getting in at the top of the cycle.

Unfortunately for those who hesitated to buy, prices have still been increasing, although not at the double-digit rates that have been the case.

Rental prices on Long Island, depending on location, currently range from $1,700-$6,000-plus for a one-bedroom to $2,500-$4,500+ for a two-bedroom unit.

The CoreLogic Corporation has been providing consumer information on the housing market. It used a Single-family Rental Index to ascertain the effect of single-family rentals on the CPI.

Twelve months after the COVID-19 pandemic began, it determined that prices for detached single-family rentals, which make up 50% of the rental market, had increased by 5%, compared to the attached properties.

This fact was not reflected in the Consumer Price Index in October 2021, which meant it wasn’t very accurate in computing real inflation.  From 2014 to early 2020, rents in the high-price tier grew more slowly than those in the low-price tier.

Comparing rent growth from the second quarter of 2020 to the second quarter of 2021, single-family detached rental houses experienced 9.2% growth, single-family attached rental homes were up 3.3%, while high-rise rental apartment houses experienced a 2.4% decline in effective rent.

Furthermore, rental vacancy rates on one-family homes declined during 2020 but rose on multifamily rentals.

High wage earners created a greater demand for detached single-family rentals, thereby causing their prices to increase substantially starting and during the pandemic.

If you wanted an apartment in the city during the pandemic, you would have gotten a super deal, with offers of one to two months free rent as well as incentives at the height of vacancies.

Today is a much different story as rents have risen to unfathomable heights and due to unaffordability,  more people are leaving New York than ever before.  The availability of reasonable rental units has not even come close to the demand that has been ramping up over the years due to the affordability of purchasing.

Even homeowners are feeling the pinch with their real estate taxes and have been forced to rent out spaces in their homes to be able to survive and stay in place.

More important incomes haven’t kept pace with the increase in rents on Long Island.

Throughout the years, Long Island and the rest of the metro area have maintained some of the most restrictive zoning in the nation, according to the Furman Center, a New York University institution that studies housing and urban policy.

From 2001 to 2018, the Island built fewer homes than the number of jobs it gained, and competition for apartments pushed up prices.

If you were to move to New Jersey or Connecticut today, rents aren’t that much different and are comparable to Long Island. The Rents can be less, but it all depends on the location and what style and luxury amendments you are looking for.

The proximity to places of major employment can also raise the value of the rentals.  The further you are away from the cities, many times, the better the deal.

Still, New York towns and villages have more power over development than localities in many other states and are approving less housing, according to a 2020 report from the Furman Center.

From 2010 to 2018, Nassau and Suffolk issued fewer building permits per person than all but one suburban county in seven states with similar characteristics, the report said.

—In a column in Newsday in July, and I quote, “Some on Long Island still have negative ideas about who lives in apartments, especially affordable ones, said Laura Harding, president of ERASE Racism, a Syosset-based nonprofit working to eliminate barriers to racial equity.

They also might have a hard time imagining smaller apartment designs or creative alternatives to large buildings, she said.

“There’s just so much fear-mongering,” Harding said, noting that Long Islanders indicated in a survey that they want more housing. “We have a great opportunity now to own that process … engage communities in designing housing for themselves, new members, young professionals, seniors.”


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