An article in Curbed by Lane Brown has gotten much publicity in Twitter. The article makes two factual claims: 1) New York City is still losing households, and thus there was no reason for rents to go back up in 2021-22; and 2) landlords are conspiring to keep supply down because some apartments are still vacant.
Since the city seems extremely busy to me, the first claim seemed a bit insane. But having said that, I live in touristy Midtown Manhattan two blocks from Central Park, so my experience is probably not an argument-settler.
Brown relies on U.S. Postal Service change of address data. Brown reasons: more people filed change of address forms to move out of the city than filed change of address forms to move into the city. Thus, the city is continuing to lose people.
But as Brown himself admits, change-of-address data misses a lot. He admits that this data “misses [moves] to the city from abroad.” Because of COVID-related travel bans, immigration presumably declined in 2020. But legal immigration has rebounded to pre-COVID levels, and some of that increase may have spilled over into New York. Change-of-address data might not include recent graduates and other people who left their parents elsewhere in the U.S. to move into the city, because those people might still be getting mail at their parents’ houses. Such data also might not reflect people who left the city temporarily in 2020 but didn’t bother with change-of-address requests because they still picked up mail at their old homes.
Most importantly, change-of-address trends do not reflect people deciding to leave roommates and get their own apartments, at least not if people changed addresses within the city. This means that even if population is stable or declining, the number of households looking for apartments may have increased. For over 100 years, household sizes have declined in New York, as they have throughout the U.S. There is no reason to believe that this trend abated in 2020-22: if anything, people may be more reluctant to live with roommates than they were in 2019, either because of COVID fears or because of increased demand for space by people who are working from home and want more privacy.
Brown’s second claim is based on a conspiracy theory: the idea that landlords are sitting on empty apartments to raise prices. He writes that there is something called called RealPage Revenue management Software, that gives managers “recommendations for how to price their available apartments such that [no landlord] undercuts the others.” (Brown admits that the managers of only 1.8 percent of NYC apartments use this software). Of course, landlords undercut each other all the time: Brown cites a $4647 studio as an example of absurdly high rents, but even in 2023 many studios rent for far less.
If housing was a monopoly, warehousing would make sense: a landlord who keeps half its apartments vacant will benefit from increased rents caused by a shortage of apartments.
But in a market with thousands of landlords, a landlord who sits on apartments is likely to lose money. Why? If I am a landlord and refuse to rent half of my apartments, I lose half of my revenue (other things being equal); the only way I recoup the lost revenue is if all other landlords cooperate. If some landlords do not cooperate in my conspiracy, my rents are unlikely to rise enough to make up for my revenue losses, thus causing me to lose revenue. In a market with thousands of landlords, I have no way to make the others follow my lead rather than undercutting me.
Moreover, rents have increased in most of the United States- so our hypothetical conspiracy would have be nationwide. Since 2020, rents have declined in only two of the 52 largest metro areas; in fact, New York’s rent increases are the tenth lowest. So if rent increases reflect conspiracies, this would mean that New York’s landlords are less conspiratorial than those in the rest of the U.S.
And if this alleged conspiracy was successful, New York’s rents would not have gone down in 2020 and 2021. They did. Case closed.*
*A side point: if a few landlords are hoarding apartments, this might actually be an argument for allowing more new construction. As I noted above, warehousing is most likely to be successful in a market with one or very few landlords. So the more landlords we have, the less risk there is of harmful warehousing. But if zoning artificially limits housing supply, there will presumably be fewer landlords than there would be in the absence of zoning.