With everyone staying home, cities make a lot less sense. Many people
who previously wanted to minimize their commutes are working from
home, and could live anywhere. People who wanted to live close to
friends and family aren't seeing them. People who like to go to
restaurants, bars, clubs, or dances aren't doing that either. On the
other hand, the benefits of living farther out, such as space,
proximity to nature, and cost, are if anything even more important.
So I've seen a stream of friends posting about how they're leaving
Boston, NYC, SF, and other cities, at least for now.
I track Boston rental listings for my rent
map, and you can see this reflected in the data. Here are new
two-bedroom listings for the last three months, compared to the same
three months last year:
Each chart shows all two-bedroom listings in the data, sorted from
cheapest to most expensive (sheet).
In April prices were about the same as last year, but they dropped in
May, and even further in June. Most of the change is in fancy units:
the median 2BR (~$2800) was $50 cheaper (2%) in May year-over-year
and $75 (3%) cheaper in June y/y, while the 90th percentile 2BR
(~$4250) fell $440 (10%) for May and $700 (16%) for June.
This makes sense: the people renting expensive units are probably
disproportionately people who can work from anywhere remotely, and
people who in normal times are highly reliant on the city for
entertainment. I expect it's even more dramatic in SF, where so much
of the housing boom has been driven by tech employment.
I think we're probably not done, though. Many landlords are small, and
slow to react to changing market conditions. We're playing reverse
musical chairs, where many landlords are going to be stuck without a
tenant come September first. The ones who have realized this are
offering lower rents, trying to keep their tenants, and as we get
closer to September I expect more will catch on.
If you're a tenant you can probably negotiate lower rent. Or,
higher risk, higher expected value, wait longer and hope for prices to
fall further. We may see some pretty desperate landlords.
Where does this leave me? While I'm a landlord, I'm on the side of
tenants here. I care much more that friends and neighbors aren't
priced out than that we make the highest possible rent from our
rooms. I'm happy to see rents falling, though I wish it were "we built
an enormous amount of new housing" and not "there's a pandemic". The
arrangement we have with our tenants is that in mid-August we look at
what comparable units are going for, and use that as our rent for the
next year. I'm expecting that will be down, and I'm OK with that.
Longer-term, I'm very curious whether will see a reversal of the past
decade where cities had been growing more and more desirable relative
to the rest of the country. I can see a world where post-covid
there's a lot of remote work, people are nervous about density, people
have become more attached to having a lot of space, and people have
formed new communities farther out. On the other hand, I can also see
a world where when this is over people are eager to get back to where
they were, and I've had enough isolation for a lifetime. Luckily I
don't need to decide whether to buy a house right now!
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I like this post. It is clearly written, well-paced, and useful . Good job dude!
How would you recommend negotiating with a landlord over the price of rent? In my case, we’re new tenants. The landlords work out of an office that’s right next door to our house. It seems unlikely that we could negotiate lower rent if the lease isn’t up for renewal. And they’d be able to make trouble for us if we did - our girlfriends bring dogs over, for example, and they could start harassing us about stuff like that. Better to say nothing?
I'm writing from a bit of a Boston perspective, and it's lease renewal season around here, so I was thinking mostly in terms of people renewing or moving. If your lease isn't up yet, then unless what you're paying has dramatically diverged from the local market or you're just not able to pay the full amount, I'd expect negotiating for lower rent not to work all that well right now?