Determinants of New York City Residential Rental Prices

Economists and financial analysts have invested a tremendous amount of energy in an attempt to explain housing sale and rental prices. Many different approaches have been taken to try to understand residential prices, taking into account qualities such as neighborhood characteristics and housing units ’ physical characteristics. This paper considers the physical and demographic characteristics of New York City neighborhoods to better understand residential rental prices in this region. The empirical analysis reveals that premiums are charged for rental properties based on location in the following order: Staten Island, The Bronx, Queens, Brooklyn, and Manhattan, with Manhattan commanding the largest premium. High rental prices are also correlated with high median household incomes and high crime rates. Finally, increases in rental prices are correlated with increases in rent-regulated or rent-subsidized housing. At a certain point, however, the level of rent-regulated housing reaches its maximum and rental prices fall thereafter. Ultimately, this study offers a bundle of attributes that may be used to understand housing prices and establishes the attributes most relevant to the pricing equation. With this study, renters, landlords, and real estate developers can better understand the real estate market and make more informed decisions as players in the market. 1 Larissa Marco is a fourth year Economics student at Washington University in St. Louis. She would like to thank Robert Parks for his support, guidance, and dedication, all of which were instrumental to the writing of this paper. She would also like to thank her friends and family for their love and encourage-ment. Please direct any questions or comments to larissa.marco@gmail.com. The Michigan Journal of Business62 I