The New York Times reports that many landlords in New York City are significantly raising rents—50 percent of more in many cases. They are trying to recoup losses suffered during the first two years of the pandemic. During that period, they had slashed rents to fill vacant properties. Renters are now paying the price for this “covid discount.”
When the lockdowns first started and employees began working from home, many realized that they didn’t need an expensive apartment in a major city. They could live nearly anywhere and still do their job. Many did that, moving to locales with more affordable housing.
At the beginning of the COVID pandemic, landlords faced an unprecedented number of vacancies. They reduced rents to attract tenants, which provided a bargain—the “COVID discount”—to the new renters. Now that things ae returning to some level of normalcy, demand for housing in major cities is increasing again. Landlords are responding with dramatic rent increases. As an example, on apartment in New York City was renting for $4,700 in 2017. In October 2020, the landlords reduced the rent to $3,300. A year later, he increased the rent back to $4,700, and recently announced an increase to $6,300.
After two years of bargain basement rents, tenants are now upset with the increases. In the example above, the tenants enjoyed a year of rent 30 percent lower than what was previously charged. And then they had another year at the same rate being charged four years earlier. If they had not received a “covid discount” they wouldn’t have been able to afford the apartment.
It is understandable that tenants aren’t happy with large increases in rent. But landlords are not the villains. For a year, landlord struggled to stay financially solvent when tenants did not pay the rent and could not be evicted. For two years, landlords have been subjected to a growing list of controls and regulations. It is becoming increasingly difficult to profitably own rental housing.
The rents that are charged are a consequence of supply and demand. Early in the pandemic, demand decreased and rents reflected that fact. Now, demand is increasing and rents are reflecting that fact.
The solution isn’t more controls and regulations, as many have suggested. The solution to a supply problem is to increase the supply. Housing producers can increase the housing supply, but they must be free to do so.