New York tops San Francisco as most expensive rental market in US

Two cities on different trajectories in post-pandemic economy

Oliver O'Connell
New York
Tuesday 24 August 2021 20:03
<p>Midtown Manhattan and Central Park as seen from the Upper West Side. New York has overtake San Francisco as the US’s most expensive rental market</p>

Midtown Manhattan and Central Park as seen from the Upper West Side. New York has overtake San Francisco as the US’s most expensive rental market

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After 18 months of disruption caused by the Covid-19 pandemic, New York has passed San Francisco as the most expensive rental market in the US.

The median rent for a one-bedroom is now $2,810, narrowly ahead of San Francisco’s median of $2,800, according to a new report by apartment listing website Zumper.

It’s the first time New York has been ahead of the Bay Area city since the firm began tracking rental data in 2014.

Rent growth across the US continues to accelerate at an alarming rate according to Zumper’s national rent index, which shows median one-bedroom rent up 9.2 per cent since the second quarter of 2020, while two-bedrooms are up even more at 11 per cent.

Just over two years ago, in early 2019, a one-bedroom in San Francisco cost $800 more than a similar apartment in New York.

Rising rents in the five boroughs of New York, and falling rents in San Francisco saw that spread fall to $520 by early 2020. Sky-high rents in the latter forced many renters to look further afield in the wider Bay Area.

When the pandemic hit, both cities were amongst the worse affected places in the US from the outset. Renters fled in droves as work-from-home mandates loosened their ties to specific locales and allowed people to escape strict lockdown measures.

“Apartment vacancies piled up, and rent went into free fall,” says the Zumper report. “By January 2021, median one-bedroom rent had fallen 23.4 per cent in San Francisco relative to March 2020, and New York’s fell 17.5 per cent. Still, median one-bedroom rent in San Francisco was $330 more than in New York.”

However, since January when the vaccine rollout began, rents in the two cities have been on very different paths.

In New York, the return of indoor dining and other urban amenities that make city life appealing caused rents to start to rise again. Prices are now up by 19.6 per cent and just 1.4 per cent below March 2020 levels.

That has not happened in San Francisco, as tech workers, who make up a disproportionate share of residents in the city, are employed by companies that are more likely to have adopted broad or permanent work-from-home policies.

Many of these former residents of San Francisco have decided that they no longer wish to live there and have upped and left for cheaper cities that offer the same kind of lifestyle.

While median one-bedroom rent has risen in San Francisco during 2021, the growth has been considerably less than in New York. Since January, rent is up 4.5 per cent, but remains down by 20 per cent relative to March 2020.

While it is unclear whether this is a permanent change or a temporary blip, if it is the latter, it could go on for some time. The Delta variant of Covid-19 has delayed many office reopenings that were originally scheduled for the autumn into early 2022.

This puts a ceiling on how much rent will rise in the Bay Area if a significant portion of the working population has no reason to return.

So far, New York has not been impacted by any significant delays in office reopenings and has a more diversified economy, with different sectors having different in-person requirements at work.

With rent in the Big Apple already returning to where it was before the pandemic, the Zumper report raises the question as to whether rents will continue to rise above pre-Covid levels or settle at their current position.

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