NYC rental vacancy is only a bit over 4% city wide. The national average is closer to 6%. It is very expensive to build in New York, and projects can be scuttled at any time due to angry neighbors or intervention by city council. The EIS process adds a ton of cost to new construction. As a result of this risk banks require high returns in NYC than in most places in order to secure loans. If you take a development loan the rental price for the units is written into the loan.

do you have evidence for this?

Vacancy rates are well low at the moment.

I think this a feature of accounting practices. Mark down rent means you mark down the asset value of the building on your balance sheet. This reduces the value of your business which means loans secured against the business are in jeopardy and it limits the potential to borrow more money. This is why commercial rents going down is a rare event. Fwiw i am not an accountant and could well be wrong.

Do you know what would motivate this behavior? Naively, any rent is more than zero rent, so why let a unit sit empty?

IIRC Sometimes some of these units are tied to a mortgage. Renting it at a reasonable price could make the price of the unit to drop making the money lender wanting to renegotiate the mortgage contract.

There's a large (20,000+) volume of empty rent-stabilized units - in those cases, landlords say that a recent tenant protection law (HSTPA, 2019) makes it uneconomic for them to rent due to the expected difficulty of evicting non-paying tenants and the strict limitations on how much repair and investment work can be recouped from increasing rent.

My gut feeling is this doesn't entirely explain it, but any tenant is also more work than no tenant, so they may not want to do the work of signing a new lease and dealing with the work it will trigger for less than you're making per-head on your current tenants.

There's probably also a fear that if you let a new tenant in for lower rent, this might lower the rent other people expect and the problem starts snowballing.

Surely this works in a short timeframe where a landlord can make a tactical decision to let the property sit empty rather than rent it out for less than a threshold. Landlords can even collude on a minimal rent below which they will not rent. (Basically "hold the line"). But how is this sustainable in the long run? The money for the original mortgage has to come from some place. Not all landlords have an infinite supply of money to keep this practice going on for a few years. (There is no VC funding available for them).

With commercial units (eg - downtown San Francisco) it is even harder because with remote work, the jobs are never coming back to the city.

On mobile so don't have a ready link. Iirc a lot of commercial real estate can get into a death spiral if the loan they have which is based on a certain amount of income starts having less income. If I can find the explanation I will add it later.

> Naively, any rent is more than zero rent, so why let a unit sit empty?

There's a substantial cost in having a renter living there, both in dollars and risk. So if the rent isn't enough to cover those, it's cheaper to let it sit unused.

Lots of empty property → less housing supply → higher rents → higher property prices

If property appreciation outpaces the gains one could make from renting it out, then it’s better to leave it empty.

Likely true, but tenant occupied properties do have additional maintenance costs.

It keeps the market rate high for other units/properties.

That does not make sense from a game-theoretic standpoint. You would be helping other landlords at your own expense. It would be better to let other landlords make that sacrifice and rent our your own properties for as much as you can get.

that's the thing. They are okay with helping other landlords because they themselves hold other multiple properties. There is more benefits by having the rates high than losing money on a few units.

It totally makes sense for the rental property owners.