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'Where Does That Money Go?': A Look Inside New York City's Ruthless Housing Market

Finding quality housing in New York has never been easy. Now, it's harder — and more expensive — than ever.

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It's one of the most difficult cities to live in, yet it continues to be one of the most desirable.

When it comes to New York City apartments, you're paying a premium, while always making compromises. Huge living room? No windows. Cozy unit? Literal closet. Classic NYC charm? Watch out for mice. And yet the summer of 2022 has proved once again that people will do almost anything for a slice of the Big Apple.

This past June and July, city rent prices hit record highs, and many tenants were slammed with staggering rent hikes. Plus, fierce competition for apartments (the usual summer rush plus a wave of people returning to the city after fleeing during the pandemic) has made the application process a nightmare — if you're lucky enough to see the apartment in the first place.

Ken Francis, a photographer born and raised in Manhattan, tells Entrepreneur that he had been comfortably living in Murray Hill for six years until his most recent landlords wanted to raise his rent by $1200. Francis said he thought it was "absurd" and turned down the renewal.

His apartment was rented, sight-unseen, 48 hours later.

"Going to look at apartments, you know 15 other people will be there," Francis said. "And then they want to charge you a hundred dollar application fee. At that point, you're not even locked in. So you're telling me that the 20 people looking at this apartment right now are giving you $100 — where does that money go?"

Related: New York Rent Reached Its Highest Levels, Ever. When Are They Expected To Go Down?

Francis is now staying with friends while the majority of his belongings sit in storage, waiting for a new home.

"I'm a grown adult with a good job and good credit," he said. "But I don't want to pay $4,000 a month for a studio…where the kitchen is in the bathroom, and I can shower and cook at the same time."

The grueling search has pushed longtime city residents like Francis to the edge and even had him contemplating whether or not he should stay in New York. With the majority of his business in the city, Francis remains in a tough spot.

"I don't want to leave New York, all of my business is here, but it's been so difficult to find the right place right now," he said.

When an estimated 320,000 people fled the city during the pandemic, it left record-high vacancies and forced landlords to give out never-before-seen deals. But those leases are expiring, and rent prices are skyrocketing. Plus, New York's streets are once again packed with tourists, and office workers are returning to in-person work.

According to the latest data from Zumper, the average rent for a one-bedroom apartment in New York City in August 2022 is $3,950, a 36% increase compared to the previous year. In 2019, in the Before Times, the median rent for a one-bedroom was $3,023.

Image credit: Zumper.com

Luke Hawksworth, a New York broker, told Entrepreneur that he has seen an influx of clients in this situation.

Related: 5 Tips for Millennial Home Buyers

"The rental market took a huge hit during COVID and landlords were getting very desperate to try to find tenants to fill their apartments, they were offering crazy incentives," Hawksworth said. "Yesterday I spoke to a new client who locked in a two-year lease [during the pandemic], and they gave her six months free on a two-year lease, but when her lease comes up, they can increase her rent to whatever they want."

Hawksworth, who has been in the real estate business for eight years, says the urgency during the summer of 2022 has been "insane," from both prospective tenants and landlords alike, from lines down the block for open houses to floods of applications before even viewing.

"There was a three-bedroom loft in Soho and the owner wanted to list it for $8,500 per month, which is not a bad price," Hawksworth said. "I listed it, and there were like over 50 groups that reached out right away, but after showing it and seeing that there was so much interest, the owner took it off the market and listed it for $12,500. Within the next month, it was rented by somebody else."

While people are still keeping up (or trying) with the competitive market, there are signs of cooling down.

"Personally, when I've been looking for both myself and for clients, I've noticed that there are starting to be price drops, mainly on the apartments where landlords are asking way too much," Hawksworth said. "I think they're starting to understand that they can't price gouge, but we are still seeing that people are renting at higher prices."

As for Francis, he's still looking for an apartment, three months later.

"I'm hoping the market calms down in the fall-winter for me to find something a bit more reasonable," he said.

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