A friend of mine sent me this article earlier today with a sarcastic comment about the relationship between housing supply and rents.
The article talks about how rents in almost every Manhattan neighborhood have fallen compared to a year ago because of a flood of new apartment supply coming online. The median rent dropped 3.6% (year-over-year) which is the biggest decline since October 2011.
There has also been a spike in the number of leases with some sort of incentive attached to it (see above). As a landlord you typically want to use incentives, such as free rent, before resorting to lower face rents. Because lower rents mean a lower overall net operating income, which in turns depresses the value of your property.
But sometimes you have no choice:
“Landlords have finally realized, ‘OK, we have to adjust these prices because the concessions aren’t doing as much,’” said Hal Gavzie, who oversees leasing for Douglas Elliman. “Customers are looking past the concessions being offered and just looking for the best deals they can find.”
A few weeks ago I wrote about a similar story playing out in Seattle. It’s almost as if excess housing supply is driving down rents.
There’s a lot of interest right now in micro apartments. Here is a recent example from New York City. Generally speaking the model is driven by a need to increase housing affordability: shrink the apartments; lower the prices.
To compensate for these smaller units, the buildings are often equipped with larger shared spaces and a desire to create a sense of community.
The below TED talk by architect Grace Kim is an interesting case study of a project that started, first, with a desire for cohabitation. Her thesis is that cohousing can make us happier, less lonely, and more socially connected.
The cohousing community that she profiles is one that she both designed and developed and one that she now lives in and practices architecture out of.
If you can’t see the video below, click here. It’s only 10 minutes. After you’ve watched it, let us know in the comment section below if this is a community you could see yourself being a part of.
https://embed.ted.com/talks/grace_kim_how_cohousing_can_make_us_happier_and_live_longer
A reader recently shared an article with me called: Why Seattle builds apartments, but Vancouver, BC, builds condos. Thanks for that.
It’s a good summary of the differences between these two markets and why over the last five years less than 4% of all new residential units built in Seattle have been condos. The story is obviously very different in Vancouver.
It’s also a good reminder that incentives matter. Capital has a funny way of flowing to where the returns are greatest.
Chart: Sightline Institute