That additional rental inventory will end up driving up rents or keeping them steady, because there’s a qualitative as well as quantitative factor in play in Manhattan and Brooklyn and parts of Queens. That’s because new construction and conversions in the sub-$4-million/luxury range in NYC is still pretty damned expensive and luxury-oriented, whether one is buying or renting. Developers in those areas aren’t building rental units for working or middle-class tenants anymore, only for upper-middle-class and higher ones.
As a result, a new 600-sqf 1-bedroom will likely rent for $4500/month (for a household making ~$180k/year), as opposed to a legacy unit of that size in the same neighbourhood that currently rents for $3000/month (for a household making ~$120k/year). The new market rate resulting from the new construction rentals will provide the landlord of the legacy unit with an excuse to bump up the rental rate to $3800/month over the next four years with no improvements to the unit, which he’ll do in a heartbeat if the city allows him to. Somehow I don’t think the household’s salary will increase by $32k during that same period.
