Rents have stagnated in much of New York City, but landlords aren’t letting up.
Instead of lowering prices, landlords are handing out one-time concessions to attract tenants, according to a recent New York Times article. These can include flashy offers like covering your broker’s fee, gift cards, and even a month of free rent.
That may sound like a sweet deal at first glance, but many renters aren’t fooled by the “gimmicks,” writes Times reporter Ronda Kaysen.
You can spot these offers in apartment listings that use the phrase “net effective rent,” meaning what you see online isn’t what you’ll actually pay month-to-month for the duration of your lease.
For example, a one-bedroom apartment listed on Nooklyn with skyline views in Greenpoint, Brooklyn advertises a net effective rent of $2,677 a month, Kaysen writes. A call to the listing agent revealed the true monthly cost to be $2,900 with the first month free. When the time comes to renew the lease, any increase would be based on the true rent price.
So, is one month of free rent worth the higher monthly cost?
Not if you’re planning to stay for more than a year.
Here’s why: If a renter signed the lease on the Greenpoint apartment as-is, they’d shell out $31,900 over the course of one year, paying 11-months of rent at $2,900. But if they found an apartment renting for a true $2,677 a month with no concession, they’d spend $32,124 during the same time frame – just $224 more for the year.
But, in the second year, assuming no rent increase, the annual cost for the Greenpoint apartment rises to $34,800 – an increase of $2,676 for the year, or $223 more each month. That could easily be a deal breaker for renters when it’s time to renew the lease.
A report by Douglas Elliman Real Estate cited by the Times revealed about 17% of rental listings in Brooklyn and nearly 24% of listings in Manhattan offered these rewards to potential renters in June.
“There’s a point where concessions become tone-deaf to the market,” Jonathan J. Miller, the author of the report and the president of Miller Samuel Real Estate Appraisers and Consultants told the Times. “A large swath of renters can’t afford the apartment without the concession.”
There is one group these deals make sense for, however: transient renters, like students.
“If you’re only going to be there one year, play the incentives as much as you can,” Erin Whitney, a saleswoman at Bohemia Realty Group told the Times. “But if you want a place to set up a home for a while, you want a lower rent.”