New York City has long been infamous for its unreasonably high residential rents, but now even tech workers making $135,000/year can't afford them. That's bad news not just for tech workers but even more so for New Yorkers who earn much less. A recent report by StreetEasy rental platform and Tech: NYC highlights the severity of the city's rent affordability crisis.
The standard measure of "affordability" for an apartment rent or mortgage payment is that the y shouldn't exceed 30% of the applicant's income. With an average salary of $135,000 annually, an experienced NYC tech worker can comfortably afford only 35% of the city's current rental inventory.
Making matters worse, an estimated 90% of New York City's tech sector jobs are in Manhattan, which is traditionally where New York City's most expensive apartments are concentrated. Even before the tech sector became synonymous with high salaries, young stockbrokers and attorneys fortunate enough to land plum jobs made Manhattan their preferred home, where their offices were located.
The combination of high-salaried employees and the prestige of living and working in Manhattan has driven up rents for decades. Last year, the median rent for studios and one-bedrooms in Manhattan was around $3,500/month, with the average rent for the entire borough at $4,000.
That means a renter would need to earn $12,000/month ($144,000/year) to afford an average apartment in Manhattan comfortably. That also leaves the average tech worker's $135,000/year about $1,000/month short of qualifying them to comfortably rent an average apartment in Manhattan. However, living in Manhattan might still be possible if they are lucky enough to find one of the few Manhattan studios or 1BRs renting for less than $3,500/month.
The situation is even worse for entry-level tech workers. StreetEasy's research found that their average 2023 salary of $76,262 would enable them to afford just a hair of over 2% of New York's available apartments. Remember that's all of New York City, not Manhattan, where entry-level tech workers can comfortably afford only 0.69% of the borough's available apartment inventory.
Commuting to Manhattan also incurs costs.Driving to Manhattan is notoriously stressful and parking the car during the workday is expensive. According to Neighbor.com, the average cost of an indoor parking space in Manhattan is around $400/month. New York's vaunted subway system is an option, but the current 30-day unlimited MTA pass rate is $132/month.
The situation worsens when considering that tech workers earn the third-highest annual salary among all employment sectors in the city, according to the New York Department of Labor. If they are severely priced out of the market, renting an apartment in New York is a Herculean task for everyone else.
StreetEasy's study showed the average tech worker earns 52% more annually than the average New York City worker. During an interview with Business Insider, StreetEasy's senior economist Kenny Lee painted a grim picture of New York's rental market when he said, "Essential workers earning average wages in their occupations - for example, firefighters, transportation workers, nurses, and homecare aides - they could afford less than 1% of the rentals in the city in 2023."
The scale of the problem is massive, but not without potential solutions. The lack of inventory in NYC has long been an issue, however the city itself already has apartment buildings jammed into every nook and cranny. Unfortunately, anti-density laws in surrounding suburbs have restricted the growth of multi-family housing, exacerbating the inventory problem. That doesn't mean NYC politicians are standing still on the issue.
Last year, NYC Mayor Eric Adams proposed a housing initiative known as the "City of Yes" plan. It aims to add 100,000 new homes to New York's inventory in 10 years. Several measures would achieve this goal, including relaxing some of the city's density laws and offering incentives to developers who build new multi-family housing. Even taken together, these measures won't solve the current problem, but they're a start.