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Spring is almost here – and people looking for a new rental apartment are facing a competitive market.
According to Zillow Group's latest rental market report, asking rents in the U.S. rose to $1,959 in February. That's only 0.4% more than the previous month, but 3.5% more than a year ago.
According to the Federal Reserve, the nationwide rental vacancy rate remained unchanged at 6.6% through the end of the fourth quarter of 2023.
Vacancy rates have increased in some cities due to new construction and more new homes are expected to come onto the rental market in 2024. However, in some cities there are only a few open apartments. New York City's vacancy rate recently reached 1.4%, the lowest level since 1968.
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Consumers looking for a new place may encounter different types of rental properties on the market, from simple rental properties to properties that may have their own unique features, such as condominiums and housing cooperatives.
“Buildings really set their own policies about what an owner can do if they decide to rent out the unit and for how long and what the requirements are,” said Carlo Romero, a StreetEasy concierge.
That means if you decide to rent, you should consider what the application process will be, what fees will apply and what amenities you'll have access to, experts say.
Upfront fees can vary significantly
Properties like condos and co-ops typically have high upfront fees, while traditional rental buildings are more likely to have local rent regulation policies.
“In a condo or co-op building, upfront costs and fees are determined at the building level and can vary significantly,” Romero said. “An application fee to rent a condo can be several hundred dollars, perhaps even a thousand dollars. And there are often move-in or move-out fees.”
By comparison, for a typical rental building, under New York state law, the application fee is capped at $20 and the security deposit is capped at one month's rent, Romero said. Wisconsin has a similar cap where the filing fee cannot exceed $20.
Rhode Island has a new state law that prohibits landlords, brokers and property managers from charging rental applicants application fees that exceed the actual cost of conducting certain background checks when necessary.
In addition to the monthly rent, be sure to inquire about any additional costs that you may incur for a possible residential unit.
What you should know about renting a condo or co-op
Condominiums and cooperative properties are primarily aimed at those willing to buy. They may appear on a rental market platform when the owner decides to offer the property for rent.
There are key differences between condominiums and cooperatives. A condominium is a property that can be owned within a larger complex. In a co-op, a resident owns a share of the building equal to the size of their unit, but is not the full owner of that property.
If you come across condos or co-ops in your rental search, here are a few things to keep in mind:
1. Condominiums
In general, condo owners have more flexibility when renting out their apartments, experts say.
“It is typically easier to get a tenant approved by the condo board than a co-op application,” Romero said, because co-ops can often have more intensive procedures with their own regulations and those rules vary from building to building.
Condominiums are typically newer buildings that have more amenities, such as: B. Laundry facilities in the unit or building, a communal pool or an outdoor area.
Most condos involve a homeowners association and HOA fees apply. Ask your potential landlord whether you as a tenant would be responsible for such costs or other “usual costs.”
To illustrate, the average HOA fee for condo owners is $300 to $400 per month, but in some markets it can be over $1,000 per month, according to RubyHome, a luxury real estate website.
In most cases, a tenant who rents a condominium has the same privileges as the owner, Romero said. However, as a potential renter, it is important to inquire whether tenants will be provided access to such amenities before signing the lease.
In some buildings in New York, for example, units are available to both condo owners and renters, but condo owners may have access to some amenities not available to renters, Romero said.
2. Cooperatives
If a co-op building allows shareholders to rent out their units, the potential tenant may be required to submit an application to live in the co-op and go through an approval process by the co-op's board of directors.
The co-op application process is actually up to building management for review, “and they can reject an applicant for any reason,” Romero said.
Each building may have its own requirements. An independent background check may be required with additional fees, experts say.
“A cooperative is like a company. They have to like you if you’re one of them,” said Frank Dong, a real estate agent with Redfin.
Additionally, co-op buildings may have rules that limit how long a tenant can live there, Romero said.
3. Traditional rental buildings
While condominiums and co-op buildings may limit how long a tenant can live, tenants have more certainty that they can continue to live in traditional rental buildings. With such properties, there is usually no risk that an owner will want to live in the unit or that building regulations will limit the length of stay.
Additionally, “it tends to be a lot easier to use,” Romero said. You know what the application fee will be, you know what the deposit will be, and you know how much you will have to pay upfront.