Even Six Figures Can’t Save You From NYC’s Rent Crisis

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1:28Sarah Holder:It makes for some pretty entertaining episodes. Listen to Legally Brunette on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts.

1:40Sarah Holder:Bloomberg Audio Studios. Podcasts. Radio. News. You know that little social media meme that you walk outside New York City just to breathe, you spend 700 bucks?

1:52Emily Eisner:Sinead Benjamin grew up in Canarsie, Brooklyn. She left the city as a teenager, but came back in 2013 to start a career as a professional illustrator and art director.

2:02Sarah Holder:I moved to Crown Heights, technically like the border of Crown Heights, Weeksville.

2:05Emily Eisner:And I was lucky I got a rent-stabilized apartment for$1 ,195. But several years and apartments later, her life in New York is getting harder to sustain.

2:15Sarah Holder:I have vivid memories of being on Craigslist circa 2013 and looking at a one-bedroom for$500 off of the Elk Top in Williamsburg. Now knowing that that same apartment that I saw is now sitting pretty for like maybe close to$5K is just ridiculous.

2:35Emily Eisner:Sinead still lives in Crown Heights, in a two-bedroom with a backyard that she upgraded to in 2021. She pays$3 ,200 a month, and her landlord just told her she's raising the price to$5 ,500 a month. Rather than swallow the rent increase, Sinead decided it was time to find another spot, preferably one in Park Slope, with some extra space.

2:59Sarah Holder:I have two pets, so having a backyard is great, you know?

3:03Emily Eisner:But this time around, her apartment search has been rougher than she expected.

3:08Sarah Holder:I make decent money as an illustrator. I make around$150 a year, and I am struggling to find a two-bedroom with an outdoor seat that isn't like$4 ,500 or$5 ,000.

3:19Emily Eisner:By a lot of standards, Sinead makes a competitive salary. But her story highlights a new reality in New York City. In the wake of unprecedented rent hikes, the rent is too damn high, even for high-earning New Yorkers.

3:33Paulina Cachero:Since the pandemic, the city has changed quite a bit. And in that time, we've seen rents rise as high as 60 % in some neighborhoods. Paulina Cachero is a real estate reporter for Bloomberg. According to the most recent New York Housing Vacancy Survey, they found about 65 ,000 households, those earning between$100K and$300K, paying a third or more of their gross income towards rent. That's tens of thousands more than just four years ago. The golden rule of thumb is that you shouldn't spend any more than a third of your income on rent. So it's really changing the way that people think about New York City, what kind of life they can afford, and for some people, the long-term sustainability of living here.

4:22Emily Eisner:I'm Sarah Holder, and this is The Big Take from Bloomberg News. Today on the show, if six-figure earners in New York can't make it there, who can? how a squeezed rental market is fueling the affordability crisis in America's largest city, and how some are proposing to fix it.

4:44Emily Eisner:It's no surprise that renting in New York right now is expensive. But Bloomberg real estate reporter Paulina Cachero says there's something new about who is starting to feel the burden of high rents. New York's growing upper middle class.

4:58Paulina Cachero:This is a group of people that you might expect to have some kind of financial security, but they're really being impacted by the rent squeeze now.

5:07Emily Eisner:I think some people might hear that higher earners in the city, people making between$100 ,000 and$300 ,000 a year, feel like they can't afford rent and kind of scoff at it a little bit. It's like, OK, but you're making a lot of money. Like, it's OK. But what is the takeaway here? If it's harder for someone making six figures to find a spot without paying more than 30 % of their income on rent, what does that mean for everyone else?

5:30Paulina Cachero:Part of what's been driving up rents in the city and what economists have been observing since the pandemic is this idea of the great reshuffle, right? So during the pandemic, COVID-19 lockdowns shuttered offices. People who had the means, more often than not, white-collar workers were able to leave the city. And that provided a rare opportunity for some people to get COVID deals. They moved into neighborhoods that weren't really affordable to them, like the West Village or Tribeca. But as the city kind of returned to normalcy, these higher earners, they came back. And actually, they came back in a big way.

6:08Paulina Cachero:And that trickles down, right? So that's raised the prices of rents for everyone. Not to mention a lot of landlords were having to make concessions. to get apartments leased. They saw all of this demand as people were flooding back to the city as an opportunity to recoup some of those COVID-19 losses. And that's when you saw these, you know, immense rent hikes in 2022.

6:32Emily Eisner:Under other circumstances, these higher earning residents might have come back to the city and went looking to purchase a home, not rent one. But that's gotten harder too.

6:42Paulina Cachero:People that might have already transitioned out of the rental market are still in the rental market, and they have more means to pay higher rents as well. There's just more people renting. It's about like two-thirds of New York City's population is renting, and that's kept pressure on the rental market as well.

6:59Emily Eisner:Right. It's more competition, especially from these higher earners. Yeah. I think I read somewhere that the amount of millionaires general in the country who are renting is higher.

7:06Paulina Cachero:Yeah. The number of millionaire renters in New York City, I think, has doubled since 2019. That kind of says it all.

7:12Emily Eisner:Yeah. The number of New York City millionaires, renter or otherwise, has reached record highs in recent years. Some estimates suggest that as of 2023, one out of every 24 New York City residents is worth seven figures or more. But as wealthy New Yorkers become even wealthier, lower-income residents are being pushed farther into the outer boroughs or beyond. Especially families with kids, who are more than twice as likely to move out of the city than households without.

7:42Paulina Cachero:Those people that are leaving the city are primarily from the city's working class, people making less than$60 ,000 a year because the cost of living in New York has just become untenable for them.

7:53Emily Eisner:So you're describing a really interesting dynamic. The amount of higher earners in the city is increasing. The amount of working class folks moving out of the city is increasing. Meanwhile, rent is getting less affordable for everyone across that income spectrum. Yeah. Including for renters like Sinead. Before$150K, you could have savings.

8:13Sarah Holder:You can travel, you know, you could be comfortable in New York. And now I feel like we're all just penny pinching, penny pinching.

8:20Emily Eisner:And so when other folks from other different cities and states listen to us complain about it, they're like, oh, I wish I had$150K. And I'm like, yeah, live in New York, bro. Come on. One of the fundamental issues driving rents higher is a nationwide housing shortage, a shortage that's especially potent in New York. Between 2010 and 2023, New York City added nearly 900 ,000 jobs, but just under 300 ,000 new homes. That means more New Yorkers are vying for a limited number of units. And Paulina says that economics play a big role in swaying what kinds of homes are being built.

8:57Paulina Cachero:The developer community in New York City points to the macroeconomic conditions, right? There's very little land in New York City. Construction and labor costs have gone up along with inflation. And they can't get the financing or the funds together to build in the first place if they're not building housing that's more expensive, right? It's what they say pencils out for them.

9:18Emily Eisner:One example is Long Island City, a neighborhood in northwest Queens that's seen a lot of development attention over the last few years. From 2020 to 2024, nearly 7 ,200 net new apartment units were added, the majority of them in high-rises with elevators.

9:36Paulina Cachero:We talked to a resident who had moved there in 1989. She spent about$400 for a two-bedroom and a walk-up. How times have changed. Times have changed. If you've been to Long Island City now, you get off at Court Square. There's a sweet green. There's these tall, luxury, high-rise buildings. and that's driven up the rent quite a bit.

9:57Emily Eisner:New developments now make up nearly a third of the rental market in that part of Queens. And median rent in those buildings is$625 higher a month than a typical apartment.

10:08Paulina Cachero:It's just an example of how these developments can continue to drive up prices and also attract a new type of resident.

10:15Emily Eisner:Emily Eisner, the chief economist at the Fiscal Policy Institute, says the city's constrained housing supply plus its growing supply of high earners are exacerbating the housing crisis. From individual property owners to larger management companies, landlords take into account a variety of factors when they set rent. But Emily says some end up setting them so high, in part because there are enough New Yorkers who are willing to pay.

10:42Sarah Holder:The landlord can potentially charge$3 ,000 a month, let's say, for a one-bedroom. And that's going to push out the family with a young kid that makes, I don't know, let's say combined$200 ,000 a year and has to pay for child care because there is demand for the unit coming from someone who has fewer overall expenses and a high enough income to pay.

11:03Emily Eisner:Paulina, how unique is New York here, though? How have other cities' rental landscapes changed in the last few years? Have they seen a similar sort of bounce back of pandemic rents?

11:13Paulina Cachero:You know, these boom towns like Austin or even like in Florida where people moved during the pandemic, their rent prices soared in 2020 and 2021 but have since started to fall. And that's true like across the Midwest and the Sun Belt where people moved to. In San Francisco, housing costs dropped and haven't recovered as much. So New York City is pretty unique in how rents have continued to rise. And actually, for like most of the months this year, Manhattan rent prices have continued to hit a record high in the summer,$4 ,700 a month, which is pretty crazy.

11:51Emily Eisner:With housing costs this high, New Yorkers are looking for solutions. After the break, how the issue has reshaped the race for New York City mayor and the proposals on the table to make rent more affordable across the board.

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