Some Rising Rents Stories

Monica and Rachel lived in Manhattan’s West Village during the 1990s. With images from Friends showing their apartment at the corner of Bedford and Grove, we see that they are in a pricey neighborhood. Their 2-bedroom should have run them $2,500 or so a month.

Then, it would have been tough to afford. Now, impossible.

TV Rents

Housing shown in 1990s sitcoms can make us wonder what the characters really could have paid.

Friends

Rachel and Monica could not have afforded their West Village NYC apartment at a market rate. But, making it much cheaper, the Friends writers explained that they lived in Rachel’s grandmother’s rent controlled apartment. As economists we know rent control is a price cap that stops price from moving up to equilibrium. Because of 1990s rent control, a West (Greenwich) Village apartment could have cost as little as $200 a month.

Even combined, Rachel and Monica were probably a low income household. My fact check said that Monica was a chef whose meager earnings are tough to estimate because we don’t know where she worked. Meanwhile, Rachel initially was a coffee shop waitress, making somewhere between $5 and $10 an hour. (Slightly different from my facts, The Hustle says they were waitresses whose combined income was close to $24,000. But we both concluded they had not nearly enough for a market level rental in the West Village.)

Sex and the City

Carrie Bradshaw also lived in the West Village. The Hustle tells us that average 1990s rents for her apartment were between $1,000 and $2,200 a month. They then guess that she could have afforded it (but not her shoes) on an estimated $60,000 to $70,000 income as a freelance journalist.

Our Bottom Line: Rising Rents

Rental markets have changed considerably since the 1990s. As you might expect, it is all about demand and supply.

Oemand

On the demand side, a substitute (a demand determinant) has gotten more expensive. That substitute is ownership. Consequently, demand increases for rentals:

Taking a closer look, we would see more high income renters finding for-sale markets too expensive and inventories too low. JCHS added that some higher income housholds prefer rentals because of their appealing amenities:

Supply

With plunging vacancy rates, the supply side also is pushing rental prices skyward. Explained further by JCHS, in areas with insufficient supply, moderate and lower income housing winds up competing with the upper segment. The competition has nudged rents upward and created shortages:

To simply explain rising rents, we just need to look at our supply and demand graphs. Demand shifts to the right and supply goes left. The result? Price up:

Returning to where we began, we could say that Rachel and Monica and Carrie Bradshaw could not have afforded to live in NYC.

My sources and more: Grabbed by a Hustle newsletter on sitcom rents, I went here to check their facts. Then, this rental housing report from Harvard was the perfect complement.