It looked like the future was grim, and for a moment, things looked grim for New York City landlords. The epidemic caused an exodus of such magnitude that property owners were forced to reduce their rent to the lowest level since the horrible days of 2011. Then a miracle occurred. (Or at least it seemed to!) The city’s ex-pats return, but they also were — in strangely similar words of the real estate industry and the reliable journalists who report on it “flooding back. “flooding back.”
“What started as a trickle earlier last year has become like a geyser of demand,” declared the broker in early 2022. There were queues over every block in anticipation of open houses and bidding battles over walk-ups that needed renovations. The rental vacancy rate in Manhattan was reduced to less than 2 percent, and the rent for median units was $4,000 for the first time in history. “I’m not exaggerating when I say that I’ve never seen the rental market as crazy as it is right now,” stated a different agent in July. This was before the prices were again soaring.
What’s the explanation? If all of New York’s deserters were turning their backs on living in the country such as the publicist profiled by New York Times who returned to Harlem after beavers invaded his backyard in Saugerties and the like — it isn’t the reason why there appeared to be fewer apartments to rent than when the people have gone. Real estate experts sought to determine the factors contributing to the problem. There may be a reason that the Fed was slowing down the sale of homes due to increased interest rates, and more renters were renting. Perhaps the couples who separated during lockdowns were splitting up and moving into one-bedroom apartments. Some singles had become uncomfortable and were sprawled out over the two bedrooms. Some remote city workers were visiting New York because they thought they would.
Whatever the reason for the situation, tenants were left with two choices to pay the price or walk away. Tenants who received pandemic-related discounts received renewal letters requesting two times the amount. People looking for new homes were advised to make offers over asking prices (i.e., ” cuck money“) on apartments they didn’t see in person; however, they were still required to pay outrageous brokerage charges and based their offers on that. They were advised that many others could if they weren’t doing so.
Also, New York City -that in the initial year of the pandemic had been designated “dead forever” was now back! If you’d not personally been exiled from your residence, you may have been inspired by it.
There was one wrong thing. It was that none of it made any sense.
In 2021 and the early part of 2022, as demand for apartments was said to be growing from a trough to a gush, New York was still being plagued by COVID-related problems. Return-to-office plans were defeated with an Omicron variant. Delta variant, and later Omicron. Tourism was low, as was unemployment, double the national average. The crime rate was reported to be soaring; the people were being led on subway tracks, and outside eating was said to have encouraged rats to roam free and in peace with humans. Did all the people who had moved to escape the fears, as mentioned earlier, actually come to the city in flood?
With each increase in the median gross rental, my suspicions grew. I was a happy resident of New York for more than two decades, going through various events and rebounds, and I wanted to believe the tale of its post-COVID triumph. What made it appear that everyone telling the story was also looking to lease me high-priced homes?
I began to discern small glimpses of an unimaginable, data-driven reality, and the possibility of a plausible counternarrative was starting to take form. “Manhattan Lost 6.9% of Its Population in 2021, the Most of Any Major U.S. County,” was the headline in a March 2022 news headline. “NYC’s Population Plummeted During Peak COVID — And It’s Still Likely Shrinking,” stated another report from a few months after. According to these reports, the New Yorkers weren’t in floods. They may still be in the process of leaking.
If that’s the scenario that’s the case, then the city’s renting surge was a violation not only of the laws that govern supply and demand but also of the principle of conservation of mass. Most of those who left the city in the last three years must have left an abundance of vacant, habitable houses. What has happened to them? Why is it so expensive and challenging to lease one today?
The Exodus
Although I’m not an expert in statistics, I pay $7 per month for Microsoft Excel, and over the last year, I’ve been quite fascinated by the U.S. Postal Service’s database for change-of-address requests. It tracks the number of individuals sending their letters to or out of every U.S. Zip Code monthly over massive, laptop-choking spreadsheets. (Extracting only the information I needed was a lengthy process involving removing all Zip Codes outside of cities and, of course, Nassau County’s zip codes mixed in with those of Queens. But I believe I have all of them.)
It’s not surprising that USPS stats show that most New Yorkers left the city during the outbreak. From March to December 2021, there was a net loss of 317 107 permanent movers across all five Boroughs. In July 2020, when moving firms were said to be so busy that they had to refuse customers at a time, 25439 people left the city. The outbound movement has decreased since that time but has stayed the same in direction. According to my estimates, the city will have lost 97,794 people in 2022. The numbers range between 6,000 and 11,000 each month.
However, that’s only part since New Yorkers left before COVID was even. Statistics on change-of-address show that there have been more departures than arrivals every month since June 2017, which was the first time I could locate information. Between June and the end of December 2022, USPS information shows that 287,212 were in the city, while 3,548,982 left with a Net loss of 6707,770.
Although change-of-address data isn’t a reliable indicator, specific business movements are thrown within. The report includes moves from other countries but only captures those that come to the city from the inside. (The Census Bureau estimates the city added 33,818 international visitors in 2019, but it is likely to be lower between 2020 and 2021 due to travel bans related to COVID. In the past year, there was an influx of more than 40,000 asylum-seeking asylums.) The data doesn’t include deaths (more than 44,000 deaths from COVID in the last year alone) nor births (negligible to me because babies aren’t able to rent homes, at least not without the assistance of their parents). It needs to find out how many of the movers in the city teamed up with roommates or even got their own homes. It doesn’t differentiate between owners and renters, but the higher outflows in summer suggest most leave after leases run out. This is only for those who can forward their mail; however, we can conclude that people moving need to pay attention and are in the opposite direction.
However, while USPS information doesn’t offer an exact estimate of the population currently living in the city, it’s a good indicator of general trends in migration. It’s consistent with Census Bureau’s figures and shows that the population of the city has been decreasing since 2016. This is also in line with other measures, including declines in the number of private and public school enrollment (down 9.5 as well as 3.6 percent from 2019), subway ridership as well as eating out.
If there was a significant increase in the number of people returning from New York in 2021 and 2022, If all the real estate experts were lying, the surge should have registered, at the very least, a tiny blip in the USPS figures. If so many people had been able to change their address on the departure, most of them would have remembered to change their addresses upon returning in the first place, wouldn’t they? However, USPS data merely shows an increasing return to the size of 2019 losses.
The Phantom Rebound
However, there are a lot of undercurrents in New York City migration, and USPS data might have missed some irregular migration. Therefore, with an open-minded mind, I searched everywhere for statistical evidence, in addition to the exploding rents — of the possibility of a rise in 2021 and 2022.
In August 2021, The Census Bureau announced that its 2020 census found more residents in New York (8.8 million) than in the 2010 count (8.2 million). Some attempted to make the numbers appear as evidence of the city’s resilience to COVID as well as the mayor of New York, Bill De Blasio (“The Big Apple just increased in size !”), however, unfortunately, the numbers were just a few weeks into the outbreak, and the gains were all before 2016. The bureau then declared it had found that New York City lost 305,000 residents between July 2020 between July 2021 and July 2020 (which is higher than USPS figures reveal for the same time) as well as that in 2020, the U.S. Census had overcounted the number of people living in New York State by about 75,000.
In November 2021, The New York City comptroller issued a widely-circulated publication about the pandemic eradication process and stated, “since July 2021, USPS data has shown an estimated net gain of 6,332 permanent movers, indicating a gradual return to New York City.” I looked over and double-checked the USPS information and could not find these moving people, so I contacted the comptroller’s office to clarify. A spokesperson pointed me to the up-to-date chart hidden inside the October 2022 issue, but it showed no change in 2021. It just continued bleeding.
On June 20, 2022, Bloomberg.com published a favorable report with the headline “More People Are Moving to Manhattan Than Before the Pandemic,” which referred to the information of the data company Melissa. Melissa’s pink-colored analysis is based on USPS statistics that show more significant numbers of permanent movers moving into the borough between March 2021 to February 2022 than were present in the years before the pandemic. However, this doesn’t consider that, by the end of 2021, monthly moves fell back to pre-pandemic levels and remained that way throughout 2022. In addition, according to USPS information, Manhattan’s net migration was negative from 2021 to 2022.
I was fascinated when a business named Placer.AI released a study in the summer of 2013 which found that Manhattan’s population had recovered from its pandemic losses. They then confirmed that Manhattan is 3.9 percent more crowded than it was in 2018. However, the company’s primary business is to analyze data from mobile devices to determine retail foot traffic rather than the location of people who live there. I asked Ethan Chernofsky, the company’s Marketing V.P., whether he was confident in his findings. He explained that because Placer.AI is aware of privacy concerns concerning location-related data, “we very aggressively remove our ability to estimate residential well.”
I spoke to more than twelve New York moving companies, including national and tristate companies. They all said they’re still moving more residents outside the city than entering it. In addition, I spent a lot of time trying to understand the meaning of the information from the New York City Water Board, indicating that the amount of garbage the city’s facilities process exploded in 2021. (Maybe everyone spits in their pants after they learned the amount of their rent would go up?) It turns out that these facilities deal with not only human waste but also stormwater, which is why 2021 is more rainy than usual. This is why the Water Board quit returning my emails after a time.
Many city workers have yet to return my emails and calls. I started to get the impression that they were hesitant about admitting to an unmistakable pattern of negative migration. One source said that it could not be just my imagination “I believe that policymakers want to minimize the story of population decline. Federal resources are distributed based on U.S. Census figures, and they would like these sources to be as high as they can and distributed in their respective districts.”
The Inventory
In 2017, I relocated to a new apartment building in Downtown Brooklyn into what the leasing agent assured me was the last available one-bedroom. However, after a few months, I started to feel worried. I was the sole person at the gym daily. It was also surprising that there was no contest for laundry machines. There were over 500 machines in my building. Did all of my neighbors sedentary?
On my way back from work, I hit an elevator switch that was not the right one and walked out onto the floor below mine, not realizing it was there. My key wasn’t compatible with the lock on what I assumed was my door which is why I changed the knob and stepped into awe into an empty and unoccupied one-bedroom. I was able to turn around and rush to the elevator, concerned that I’d be slapped with a ticket for trespassing. But I saw tape bands covering the doorframes of those (presumably empty) apartment buildings on the floor.
That’s how I became aware of “warehousing,” the practice landlords use to keep vacant properties off the market to create artificial scarcity. The building owners have always done this, especially in new buildings with a lot of inventory. Why give renters a monopoly in the first place if they don’t need to?
However, they began to do it during the outbreak. In the 2022 edition of the podcast about the real estate industry “Talking” Manhattan, Gary Malin, Co-Owner from The Corcoran Group, made a shocking assertion: “At one point during the downturn, the vacancy rate in the city was close to 25 percent,” said the Corcoran Group’s CEO. “You had owners sitting on hundreds if not thousands of empty apartments.”
Officially, at the height of the COVID exodus, the vacancy rate for Manhattan is 4.3 per cent, which is the highest in, at minimum, 14 months. However, the “official” vacancy rates we read about come from market reports provided by brokerage firms such as Corcoran or Douglas Elliman and only represent the number of apartments available for rent that landlords have advertised rather than the number of empty flats. With the motivations for not reporting, it’s a bit like calculating a city’s crime rates by asking criminals the number of victims they killed and robbed this month.
I requested Malin to determine the actual rate of vacancy post-rebound. “I think it’s close to 2 percent,” Malin said. This would bring it in line with the official rates. “Unless an owner is intentionally keeping units off the market for whatever their reasons — maybe they need renovations, maybe they plan to sell the building and think it’s better to sell it vacant — right now, if you have apartments available, you are renting them.”
However, a drop of 23 points in the city’s vacancy rate could signal the inflow of hundreds of thousands of people, which still needs to be reflected in other statistics. Which are the sources? Perhaps more importantly, if property owners had lied to us about the size of their unutilized inventory just a few years ago, why should we now believe them?
We know that, at most, the 20,000 rent-stabilized homes are being stored, as the owners have admitted to this. (A 2021 Census Bureau estimate estimates the figure as 42,860.) The owners blame a state law known as the Housing Stability and Tenant Protection Act which restricts their ability to increase rents to finance improvements. They claim that their units are in such a bad condition that it’s impossible to pay for the needed repairs at rent-stabilized costs, so they’re holding the units in limbo until Albany removes the law.
“Some of these apartments had been occupied for 20 or 30 years,” says Jay Martin, executive director of the landlord group, the Community Housing Improvement Program. “They require major renovations. Some contain asbestos and some contain lead.” However, Linda Rosenthal, chair of the New York State Assembly Committee on Housing, is skeptical. “I went into one of those units,” she informs me. “It needs a coat of paint, maybe a new bathroom sink.” (Rosenthal has suggested an End Warehousing Act of 2021 that would punish those who leave their vacant units for more than three months.)
Whichever way you look at it that it’s a blemish on all of us that there are thousands of vacant rent-stabilized homes in the city, which saw more than 100,000 in shelters for homeless people in the past year. However, this is just one aspect of New York’s rental affordability crisis. Mothballing these units may be different from why the cost for market-rate Manhattan one-bedrooms exploded to the point of infinite. “These stabilized units are a completely different product,” Martin says. Martin.
The Dark Towers
I’m very interested in the numerous luxury rental properties that have appeared within Manhattan and renovated neighborhoods such as Downtown Brooklyn, Williamsburg, and Long Island City in the past decade. Many of these structures were constructed simultaneously to benefit from the well-known tax cut, which expired in 2022. This led to an oversupply of so-called high-end units that were far too costly for most New Yorkers. For a long time, the owners of these buildings were required to provide concessions like rent-free month-long periods on leases. (Although it’s fair to say they had been performing a little less by February 2020, just before the outbreak.)
I spoke with a moving company dispatcher who told me about having a deal with the manager of the Downtown Brooklyn tower about becoming the preferred service of the building when it was first opened in 2017. “We were jazzed. They assured us of all this work, and we enlisted more people to take on it,” he said. “We went through all the hoops, but we got only three or two jobs from it. There was no movement.”
The areas with these high-rises with high prices experienced many of the city’s highest peak COVID losses, and those who fled were those who were most likely to lease the high-rises. Based on IRS statistics, the city’s pandemic deserters earned averages that were higher by 28 percent than those who remained. A new rental building located in New York’s Financial District reportedly saw occupancy decrease by 24 percent in 2020. Yet, somehow, in January 2022, the supply was gone when prices for the most luxurious buildings hit all-time highest levels.
I need proof that the apartments in these towers are being resold, which may be odd in today’s hot market or any other market. If the demand for high-end units is lower than we’ve been told, I’m curious if landlords are hiding their inventory to increase rent. What’s the point of listing the vacant properties, even with lowered prices, because getting a portion of the rent is better than not paying any? It could be because owners must make large loans to build the buildings, and loan agreements typically require that they charge a minimum amount. This is also the reasoning behind the confusing “net effective rent” scheme, which means that the advertised price of an apartment includes prorated rent-free periods to ease the burden of the actual (potentially obligatory by a lender) price.
However, I confess that my conspiracy theory breaks down. The question is: If all these luxurious buildings had hidden supply and a brilliant landlord cut prices by opening up their entire inventory and making a profit in today’s artificially increased price? Sure, one would. So I was about to end this piece with a heartfelt regretful apology for criticizing the sincerity that is the New York City real estate community.
The Algorithm
However, in September, ProPublica revealed what appeared to be evidence of a conspiracy. Sure, landlords were using the software for quite exciting things.
The application can be described as RealPage Revenue Management Software and is developed by the Texas-based company RealPage it can collect information about inventory and pricing from building owners who are competing and use the information to offer them individual guidelines on how they should price their apartments so that no one is undercutting the other.
Some believe — and include the plaintiffs in more than a dozen class-action lawsuits brought following ProPublica’s report RealPage’s software lets landlords on their own maintain their clean slate and, in turn, conspire to increase rents. In 2021 a RealPage executive boasted at an event that his company’s algorithm was behind the rise in rent across the country. “I think it’s driving it, quite honestly,” the executive said, per the report. “As a property manager, very few of us would be willing to raise rents double digits within a month by doing it manually.”
Landlords can choose to reject the pricing guidelines of RealPage, but Former employees from the business have told ProPublica that as high as 90% of recommendations are adhered to. The software could be a better tool for negotiations with tenants and has been known to advise owners to raise prices by limiting the supply.
On a call to discuss 2017’s earnings, RealPage CEO Steve Winn outlined how a property manager witnessed revenue increase when buildings that had been at 97 percent or 98 percent cleared by 95 percent, “an occupancy level that would have made management uncomfortable before.” According to one lawsuit, “This is a central mantra of RealPage, to sacrifice ‘physical’ occupancy in exchange for ‘economic’ occupancy, a manufactured term RealPage uses to refer to increasing prices and decreasing occupancy in the market.”
The algorithm behind RealPage was developed by a man known as Jeffrey Roper, who was Director of Revenue Management at Alaska Airlines in the 1980s during the time that the airline, along with others, created software that resulted in the conclusion of a price-fixing agreement in 1994 with the Department of Justice in 1994. (The DOJ is now reportedly investigating RealPage.) Compared to RealPage, human property management professionals can show “way too much empathy,” Roper said to ProPublica.
Based on their candid interviews in other publications, it’s why the RealPage press office refused to allow me to speak to any of the company’s top executives? A spokesperson, however, said, “Rent prices are driven primarily by supply and demand, and in New York, vacancy is very low, causing rents to rise.” RealPage’s website boasts it has “proven, cycle-tested, disciplined analytics that balance supply and demand to maximize revenue growth.”
A spokesperson from the company tells the reporter it is true that RealPage software is utilized by property managers who manage around 1.8 per cent of New York City rental apartments. However, consider New York City’s estimated inventory of 2,274,000 and possibly 40,932 units. And based on the type of apartments they are in, and their location, Coordinating to set prices for them could disrupt market dynamics beyond directly similar homes. Rent increases triggered by RealPage on high-end rental properties could cause prospective tenants of these units to look for more affordable alternatives and increase prices in the middle of the spectrum.
It’s not easy to figure out the names of all RealPage’s clients; however, Greystar is the largest property manager within the U.S. It is reported that it utilizes the program to determine the rents for 168,000 units across the country. Greystar’s website features 25 properties throughout Manhattan, Brooklyn, and Queens, which are packed with apartments priced in a way that is as reasonable as you would think. Do you know anyone searching for a Studio for $4,647? (Greystar did not respond to multiple inquiries for clarification.)
My suspicions aren’t true, and all the properties are filled. Their tenants came back to New York last year. Some were former couples who split amid the epidemic and required two times as many apartments. Other remote workers are from Milwaukee or Akron and avoid city taxes by claiming residence in their former states. Perhaps they arrived without furniture, so they didn’t need to pay for a mover. Maybe they’re homeschooling their children, using Uber instead of subways, avoiding eating out, and avoiding all other activities that expose them to data collection. Stranger things have occurred here. If you meet any of these individuals, please fill out a form to change their address for me. They’re likely to be missing important mail.
