New York City rents are rising seven times faster than wages, making it harder for low- and middle-income residents to find affordable living arrangements, according to a new market analysis.
Economists from the rental listings platforms Zillow and StreetEasy found the yawning gap between median rent and average wage increases in New York City outpaced that of every other metropolitan region in the country.
While average wages in New York City increased by about 1.2% last year, median rents surged by 8.6%, per the analysis of Zillow rental data and statistics from the U.S. Bureau of Labor. But nationwide, average wages grew faster than rents.
Kenny Lee, an economist with StreetEasy, attributed the rise in rental costs to a severe housing shortage that triggers a “vicious cycle” of price hikes by landlords.
“The report really underscores the need for action,” he said. “The really historical shortage of the supply of affordable homes in New York City has made it challenging for renters to find an affordable place to live in the city.”
The dramatic increase in rents comes as millionaires flock to the five boroughs and median home sale prices also continue to surge. New York City now has a higher concentration of seven-figure earners than anywhere else in the world, according to a recent analysis by consultancy firm Henley & Partners. Median home sale prices also increased by more than 18% in the metropolitan region in the first quarter of the year, according to new data from the National Association of Realtors.
New York state lawmakers last month approved legislation meant to curb dramatic rent increases for many tenants by allowing renters to challenge increases over 8.5% in most cases. But the new “good cause” law — so named because landlords are supposed to provide a reasonable justification for evicting tenants or raising rents — includes various exemptions and gray areas that are yet to be litigated.
New York City is attempting to subsidize more housing for low- and middle-income renters, but the affordability metrics used to determine rents in most of those units fail to match the income levels of most residents, according to a recent study on rents and incomes by the nonprofit Community Service Society of New York.
Lee of StreetEasy said local renters face another unique affordability challenge not reflected in monthly rents: onerous brokers fees. “Application fees, credit check costs as well as the broker fee can add up,” he said.
Still, the report found that over the past five years, the gap between median rent and wage increases in New York City has paled in comparison to those gaps in other parts of the country, especially major cities in Florida.
During that period, local rents rose by about 27.5%, while wages rose by about 11%. But rents in Tampa rose by 50%, more than triple the rate wages increased, according to the analysis. Meanwhile, a 53% rent increase in Miami was more than double the rate of wage growth there, and a 37% rent hike in Jacksonville was nearly quadruple the rate of wage increases in the northeast Florida metro area.
“Florida has really seen the most dramatic affordability shift in the country,” Lee said.
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