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New York City’s rents pass record set in boom

Gary L. Malin, the president of Citi Habitats, the city’s largest rental brokerage firm, does not surprise easily when it comes to the region’s real estate market.

But when Malin’s company was preparing its latest analysis of the rental market, he was taken aback. In March, the firm found, the average rent in Manhattan — at $3,418 a month — surpassed the all-time high set during the real estate frenzy of 2007.

“Right now, landlords can go for pie in the sky — why not?” Malin said.

The last time rents shot up in a similar fashion, they were tied to a strong economy, low unemployment and booming business on Wall Street.

This spring, however, Manhattan rental prices seem to be divorced from the larger economic picture. While the city has added jobs in recent months, especially at technology companies, much of country is still struggling.

The uncoupling of the national economy from New York’s is not typical, said Jonathan J. Miller, the president of the appraisal firm Miller Samuel.

“When you see rents rising, it is usually reflective of a strong economy,” Miller said. “That is not the case now.”

Instead, he said, prices are being driven up by a tight credit market that forces people to stay in the rental market and, at the same time, limits new construction.

That disconnect, however, has only increased resentment levels among many tenants. Still, many have nowhere to go if they choose to live in Manhattan, where the vacancy rate for apartments is about 1 percent.

“I felt trapped,” said Jaclyn Barrocas, who was recently hit with a big rent increase on her East Side apartment. “It was too expensive to move and too expensive to stay.”

There is some evidence that rising rents are driving prospective renters to buy. But for those who determine that buying a home in New York City is not an option, the choices are limited and often unappealing.

As a result, there has also been a surge of interest in the other boroughs, with many neighborhoods reporting record rents of their own.

In Southwest Florida, rents have also risen in the past year, in part because an abundance of home foreclosures has pushed new renters into the market.

Though rental prices range widely here — some waterfront or beachfront vacation places in winter fetch as much per week as Manhattan apartments get per month — there has not been a surge in prices partly because there are now so many rentals available, the result of wave after wave of purchases of foreclosed homes by investors.

Back in New York, the problem is unlikely to abate anytime soon. That is because just 2,229 rental apartments are scheduled to be added to the market this year in Manhattan, a 30 percent drop from the average number over the last seven years.

That low vacancy has pushed Manhattan rents up markedly. Rates for one-bedroom apartments have risen the most, to $2,747 a month, a 6.5 percent jump over the past year, according to Citi Habitats.

Three-bedroom unit prices rose 4 percent, to $5,107 per month.

Some renters have battled back against increases by moving to even pricier quarters. Joseph Rosati, 25, and two friends did that when their rent was slated to go from $3,700 a month to $4,300 a month. They found a two-bedroom apartment with an office at 37 Wall St. for $5,400. Although they are paying more, they are satisfied.

“I did not move to New York City to live in Hoboken or Jersey City,” Rosati said.

What could halt rising rents — besides more apartments to choose from? In 2008, it took the nation’s financial meltdown to calm rent hikes. Then, big landlords began offering incentives like two months’ free rent on a one-year lease. Those incentives lingered until 2010.

One solution to spiralling rents, of course, is to leave the borough entirely.

Kimberly Kreuzberger and her husband, Bryan, both 32, loved their loft studio at 666 Greenwich St., which cost $3,200 a month. But when the rent was slated to bump up to $3,795, after three years, they balked.

The couple settled on a two-bedroom apartment in Brooklyn. They paid just over $1 million, putting 25 percent down. Their monthly outlay is $4,250.

“It was such a leap,” she said. “But we could not be happier.”