After tasting the high life in luxury buildings, legions of discount-chasing Manhattan renters are now swallowing a nasty dose of real-estate reality.
During the worst of the last recession, new luxury buildings eager for tenants hooked New Yorkers with several months of free rent, significanly decreasing their net-effective monthly rates.
Renters were living well — with a slew of free amenities thrown in — and signing leases without paying broker fees. But that bubble has burst.
“The rents in some of these apartments are going up 20 to 25 percent from the bottom net-effective rate two years ago,” said Jeff Schleider, founder of Miron Properties. “Up to a year and half ago, we were telling landlords to lower their rents and offer incentives to fill their apartments. They just don’t need to do that anymore.”
Most frustrating for renters is the fact that yearly rent increases are being based on the original, concession-free rents, rather than the net-effective rents. In many cases, that means renters are being asked to shell out hundreds of dollars more per month.
“Owners are smart, savvy business people. They kept their rents on the higher end but gave free months, so when the time came to renew leases, rent increases could be based on those higher monthly rents,” said Gary Malin, president of Citi Habitats.
But Malin understands renters’ frustrations. “Most people didn’t think the rental market would bounce back this quickly. And they had the expectation that the economy would need to improve significantly to see what’s happening now. And that just wasn’t the case.”
Today, the low vacancy rate — which in June had hit the lowest level since 2006 — can be attributed to the fact that unemployment is relatively low in Manhattan, and people are choosing to stay put when they see how high rents are, according to Malin.
Here are the stories of three New Yorkers who learned the hard way that the jig was up.
Staying Put ... For Now
Shabnam Salehezadeh, 35
Rent hike: $250
Salehezadeh got socked with the hike by her landlord at Ocean, a luxury building near Battery Park, but unlike others facing reality’s bite, she’s decided to stay for the moment.
Her story is not unlike many others seduced during the real-estate rout of the Great Recession. When she moved into her apartment (a studio with an office) in 2009, she was given three months free and paid no broker fee. The advertised rent was $2,695 but her net-effective rent was a more wallet-friendly $2,156. In 2010, despite the building’s attempts to raise her rent, she dodged a jump. But in 2011, negotiations became much tougher. She managed to get the rent down from a $2,550.95 asking rate to $2,400 — “much more than I wanted to pay ... and that was after a lot of negotiation,” she said.
Joing the Exodus
Cameron Swiggett, 23
Rent hike: Nearly $600
Swiggett moved into a luxury building chock-full of amenities at 10 Hanover Square in 2009. He and his two roommates were given two months’ free rent and a gym membership on a two-bedroom apartment. The original 2009 rent — $5,275 — was reduced to $4,350. In 2010, he fought off a large increase, and he and his roommates paid a net-effective rent of $4,700. But this year, the building raised the total rent to $5,275 and killed the gym membership. They moved.
“A lot of our friends have left the building,” said Swiggett. “At some point, it’s even less about money and more about principle.”
The Cautionary Tale
Marci Schultz, 29
Rent hike: None, but the deal just wasn’t good enough
Schultz and a roommate moved to the brand-new Avalon in Fort Greene in January 2010, after years of living in walk-ups.
“We wanted to grow up a little,” she said.
She looked past the immediate area, which isn’t so happening, and signed a two-year lease for a two-bedroomapartment, with two months free and $500 off the third month.
“It was absolutely gorgeous and brand-new. The views were amazing and there was a washer and dryer,” she said.
But Schultz soon discovered that about $1,700 per month, plus utilities, was more than she could handle. She fell behind on rent and had to leave in April.
Schultz plans to move into a new — and cheaper — Manhattan share in September, where her rent will be less than $1,400.
After crashing with friends, she’s staying with her parents for now.
“I’m saving money and trying to make sure that I’m never in this situation again,” she said.
“I was living this lavish life for a year. It was the free rent that enticed me. I thought I was getting a good deal.”