The Real Deal

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Rentals face pink slip problems

Roommates Paul Walker, left, and Ben Muessig. Walker was laid off and is relying on savings and unemployment benefits to stay afloat.

In boom times, it was common for twentysomethings to blow half their paychecks on rent in desirable buildings. But in this faltering economy, what happens when one roommate's high-paying job disappears, and with it the paycheck for his or her portion of the rent?

Brokers say that's exactly what many renting roommates are going through now, as layoffs become more widespread.

"It's happening all over the city," said Marc Lewis, president of Century 21 New York Metro. "Landlords are getting calls every day from people who are sharing apartments who have to move [because one of the roommates has lost their job]. Or, people are calling in the middle of their leases and asking for a rent adjustment."

The fact that roommates are having trouble coming up with the rent as companies shed staff should not come as a huge surprise in a city that is known for rental shares, especially among young, single professionals right out of college. According to the state Department of Labor, the city's unemployment rate is now more than 7 percent, compared to 4.6 percent in December 2007.


Changing dynamics

As more New Yorkers face the reality of living with a suddenly unemployed roommate and paying the rent becomes an issue, those who are still employed are often forced to find new apartments at a moment's notice. That, in turn, is drastically changing the dynamic of how landlords, tenants and brokers go about making deals.

Adina Azarian, president of Adina Equities, which represents landlords in exclusive deals, said last month that one of the landlords she works with sat down recently with three roommates to renegotiate the lease of an $8,250 three-bedroom Gramercy duplex rental apartment. The tenants were recent MBA graduates with finance jobs, but one of the roommates, who is from Dubai, was laid off and lost his work visa. Meanwhile, the other two were forced to take 35 percent pay cuts to keep their jobs.

Azarian said the landlord offered the roommates a 20 percent rent cut but required them to sign on for another year.

"I can imagine that this type of thing would be going around a lot right now with the amount of layoffs and unemployment," Azarian said. "It's a special apartment, so [its pricing] might be a little out of the norm, but the fact of the matter is no matter how special an apartment is right now, the market is down."

Andrew Barrocas, CEO of the Real Estate Group New York, noted that the problem is particularly acute among younger tenants because they don't have the financial safety net of older renters.

"The younger generation prefers to stay together [as roommates], but ultimately it comes down to jobs," said Barrocas. "If they don't have jobs, they're looking to get out of the lease because they don't have the cushion that somebody in their 30s or 40s would have — and the job market is not opening up."

Azarian said the situation has been frightening for many of her clients. One distressed renter came to her recently, searching for a new apartment after his roommate lost his job and couldn't pay the rent.

"He was in a real panic, and he just had to leave," she said. "He was going to get stuck having to pay the whole entire rent, and he was not in a position where he could carry his and his roommate's share."

Azarian found the renter an apartment on the Upper East Side, but because of the immediacy of the situation, the landlord hadn't yet fixed up the apartment — and ended up knocking $500 off the rent.

"It's a renter's market, and you have to change your approach overnight," Azarian recalled telling the landlord.


Parents step up

In other cases, Barrocas said he has seen parents step up to help their children with rent payments. He said he's also seen newly unemployed roommates sublet their room and move elsewhere — be it back home or to cheaper rentals in other neighborhoods. When that doesn't work, sometimes the rent check is delayed.

"I've unfortunately heard of quite a few people who are late on their rent — sometimes a month-plus," Barrocas noted.

Denise Salizzoni of Manhattan Apartments said some landlords at luxury buildings have told her that when tenants suddenly become unemployed and cannot pay the rent, they are holding those who break leases accountable for the rent until the unit is occupied again.


More trouble later

Brokers also say that renters who can't pay their bills could have even more problems renting in the future.

One young renter, Ben Muessig, who lives in southern Park Slope, has a roommate who was laid off in December.

"It's a reality that within two or three weeks, we could all get laid off, and I think it's something that a lot of people in their 20s are going through," said Muessig, who is a newspaper reporter in Brooklyn.

Muessig's girlfriend moved into the apartment in December, which helped lower the $2,400 rent so that the couple didn't have to find a cheaper place to live. Muessig's original roommate, Paul Walker, who was laid off from a music television station in December, said he has enough money between his savings and unemployment benefits to stay afloat until he can find a new job. He said he has not yet told his landlord that he lost his job because he is confident enough in his financial stability for the time being.

"As long as they're getting their rent, I don't think they'll call me," said Walker. "And I've been diligent about paying them on time."

Landlords, meanwhile, are in the precarious position of wanting to fill vacancies while making sure that the tenants they attract can actually pay the rent. Since having a tenant, even one who has a spotty financial situation, is generally better than leaving an apartment empty, Azarian said her landlords are now accepting — in certain circumstances — tenants who previously would have been rejected.

"They'll take people with guarantors that would have been passed on, or maybe they'll take a small dog; things like that. You have to go with the flow," she said.

Barrocas, however, said he's seen landlords react in a variety of ways.

"There are some landlords who have gotten burned in recent months, and they're a little more skeptical and want more protection," he said. "And there are other landlords who understand the market being in the state that it's in, and they've actually eased up on their approval process."

Salizzoni said that for those who are still employed, there are great deals to be found on studios and one-bedroom apartments citywide. And, of course, landlords have been making headlines for waiving security deposits, throwing in free months of rent and being more accommodating.

"It's an anything-goes kind of market — and landlords are breaking all the rules," she said.