Manhattan Rentals Tighten as FARE Act Squeezes Supply

Written by:

Alejandra Rodriguez

Date:

05 Jun 2026

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Manhattan’s residential real estate market is showing signs of recovery in 2026, but the path forward remains uneven. Inventory is climbing, buyer activity has picked up, and policy changes are reshaping how transactions get done. Yet for those working the market daily, the picture is more complicated than the headlines suggest.

Douglas Wagner, Director of Brokerage Services at BOND New York, one of the city’s longest-standing privately owned residential brokerages, has watched the market through multiple cycles over his 16 years with the firm. His read on current conditions is measured: things are improving, but not yet where the industry had hoped they would be by now.

The FARE Act’s Unintended Consequences

The most disruptive change in the New York rental market over the past year has nothing to do with interest rates or inventory. It stems from a regulatory change that was meant to help tenants, but, by most brokers’ accounts, has made their situation worse.

The FARE Act, which took effect in June 2025, changed the longstanding practice of tenants paying broker fees when securing a rental. Under the new rules, if a broker publicly advertises a rental listing, the assumption is that the broker represents the landlord, and the landlord bears the commission cost. The intent was to reduce the upfront financial burden on renters entering the New York market.

The result has been the opposite. Landlords who cannot absorb broker fees in their operating budgets have simply pulled their listings from public platforms. Advertising a unit now triggers a fee obligation, so those properties quietly disappear from the market. The result is a significant reduction in visible inventory at the exact time of year when demand is highest. “This FARE Act has really caused the availability of listings to be massively reduced, and they’ve caused the cost of apartments to be driven higher and higher,” Wagner says.

With less supply competing for the same pool of renters, prices have climbed to levels that would have seemed unrealistic not long ago. One-bedroom apartments are now commonly listed at $6,000 per month, requiring an annual income of roughly $240,000 to qualify. Studio apartments are reaching $4,000 to $5,000 monthly. “Who, earning $200,000 a year, wants to live in a one-room studio apartment?” Wagner notes.

The Co-op and Condo Divide

On the sales side, the price gap between co-ops and condos has become one of the defining dynamics of the current Manhattan market. The spread, which Wagner puts at 35 to 40 percent in some cases, is large enough to represent a meaningful financial decision for buyers, yet many still gravitate toward condos.

The reason comes down to ownership rights. Co-op buyers purchase shares in a corporation and are subject to board oversight on everything from subletting to kitchen renovations. Condos offer more autonomy. In concrete terms, new development co-ops in prime Manhattan are trading at roughly $1,400 to $1,600 per square foot. New development condos in comparable locations command $2,100 to $2,200 per square foot. That gap of up to $600 per square foot reflects what buyers are willing to pay for the freedom a condo provides. “People who don’t want that level of control by an outside force avoid co-ops, and it makes co-ops less expensive,” Wagner explains.

The preference for condos is especially pronounced among buyers who are newer to New York or who come from markets where co-op ownership is not common. Long-time New Yorkers who grew up with the co-op model tend to be more comfortable with its constraints, and for them, the value proposition is clear. For everyone else, the condo premium often feels worth paying.

A Market Recovery That Stalled Mid-Stride

After several years of constrained inventory and cautious activity, Manhattan’s sales market entered 2026 with genuine momentum. Inventory had been building through the fall of 2025 as sellers who had been waiting on the sidelines finally brought properties to market. Interest rates had started to ease, and by early in the first quarter, they had dropped to levels not seen in some time. Deals were moving quickly, with contracts being signed from late January through February.

Then geopolitical disruption interrupted the momentum. “The whole Iran conflict threw cold water all over what had begun to be a high-momentum sales market,” Wagner says.

The market has not collapsed, but it has slowed from what many in the industry had anticipated. Inventory has improved, reaching approximately 6,750 active listings at its recent peak, compared to a normalized level of around 7,200. That gap may seem small, but in a market as supply-constrained as Manhattan, the difference matters. Deals are happening, but not at the velocity that the strong fall had suggested was coming.

Co-op Reform Takes a Small Step Forward

While market conditions have been shaped largely by external forces, one area of internal progress involves co-op board regulation. New legislation passed by the New York City Council now requires co-op boards to respond to purchase applications within a defined timeframe, addressing a long-standing frustration for buyers and sellers alike.

The co-op purchase process is already demanding. Buyers must submit extensive application packages, sometimes running to 400 pages, covering full financial disclosure, personal references, and supporting documents. Boards review applications in stages, first on paper and then through an in-person interview, and can decline without being required to explain why. The new legislation does not change that last point, but it does limit how long a board can leave an application pending without responding.

Wagner acknowledges the improvement while noting its limits. “It’s not a solution completely, but it’s an improvement.” For buyers navigating the process, having some timeline certainty reduces the risk of cascading problems, particularly for those who are simultaneously managing a rental departure and a purchase closing.

Waiting for an Economic Signal

Beyond the specific dynamics of rentals, co-ops, and inventory, broader economic conditions remain the key variable for the market’s next move. Stock market volatility, interest rate uncertainty, and general economic anxiety are keeping high-net-worth buyers cautious even when the underlying fundamentals might otherwise support action.

Wagner says the market needs sustained confidence before buyers will compete aggressively for properties or stretch their budgets at current borrowing costs. “We need to get some better confidence in our national economy, so that people will feel that, okay, I’m having to go into a five-way bidding war for this property, I can spend a little bit more,” he says.

The pieces are largely in place. Inventory is up, rates have come down from their peaks, and demand remains real. What the market appears to be waiting for is a sustained period of economic calm that gives buyers the confidence to act on what they already know is there. Until that arrives, Manhattan’s recovery will likely continue at its current measured pace, real but restrained, with activity concentrated among buyers who feel financially secure enough to move without waiting for a clearer signal.

About the Expert: Douglas Wagner is the Director of Brokerage Services at BOND New York, one of New York City’s longest-standing privately owned residential brokerages. He has worked in the NYC real estate market for more than three decades.

This article is based on information provided by the expert source cited above. It is intended for general informational purposes only and does not constitute legal, financial, or real estate advice. Readers should conduct their own research and consult qualified professionals before making any real estate or financial decisions.