One of the bigger stories of 2016 is the slowdown in New York’s rental market. But what explains it?
One common view is that rents simply rose too quickly in previous years, making many apartments unaffordable and eventually putting downward pressure on prices. Others point to the boom in multifamily construction, which added heaps of new supply. Figures released by the U.S. Census Bureau Thursday hint at a third possible factor: New York’s population is no longer growing at the rate it used to.
The city’s annual population growth has fallen for five consecutive years and now lags well behind major West Coast cities like San Francisco and Los Angeles (see chart).
New York City added 55,000 residents between July 2014 and July 2015, bringing the total population to 8.55 million, the census bureau estimates. That translates to an annual growth rate of 0.65 percent. Meanwhile, San Francisco and Los Angeles saw their populations grow by 1.44 and 0.89 percent, respectively.
Census figures also show that despite all the talk of a flight to cities, suburbs have actually been growing at a faster pace than major urban centers. The 50 largest cities accounted for 20 percent of overall U.S. population growth in 2015 – down from 26.7 percent in 2011.
Population growth is an important driver of rental prices because it increases the demand for housing.
According to an April report by appraisal firm Miller Samuel, median net effective rents in Manhattan and Brooklyn grew by 0.4 and 0.6. percent respectively between April 2015 and April 2016 – down from 3.9 and 5.5 percent a year earlier.