If you are like me, your idea of what it costs to rent in NYC is far from the reality.

Nearly every apartment you will find online or see through a real estate agent is part of New York’s non-regulated rental stock, which makes up only about one-third of the apartments out there.

You may be surprised to learn that the other two-thirds, those that you are not seeing, pay an average rent of about $1,000 per month.

Here’s why, and what it means for you:

To start, it is a myth that all of New York City is unaffordable.

As demonstrated in this analysis by Constantine Valhouli, outside of Manhattan and western Brooklyn, housing is generally pretty affordable.

So, the real question becomes, why are rents in Manhattan so expensive? But first, let’s start with a simpler question.

What is the average rent in Manhattan?

According to the Census Bureau’s NYC Housing & Vacancy Survey for 2011 (the last year the study was conducted), the average rent in Manhattan was: $1,658

If we instead look at the 2011 Douglas Elliman Rental Report, they report a much higher number: $3,663

Why do these two sources disagree by so much?

Because they are based on very different samples. The Census’s figure is for all intents and purposes the “correct” number, based a cross section of households in Manhattan. In contrast, the Douglas Elliman report is based on the rental listings that the brokerage sees. These are essentially the same listings that you see when you search any real estate portal on the web.

However, excluded from Elliman’s sample are public and rent-regulated housing, which make up the majority of Manhattan’s apartments. Here is how Manhattan’s rental apartment stock breaks down.

As shown in the chart above, only 36% of rental apartments in Manhattan are unregulated. For apartment seekers that do not qualify for the highly-coveted rent-regulated units, 64% of the available rental supply is effectively out of the picture.

Rent regulation fences off 64% of Manhattan’s available housing stock.

Here is how the distribution of rents looks.

In most cities, this distribution looks much more like a typical bell curve, with a single peak in the center.

In Manhattan, because of the city’s rent regulation policy, you get this unnatural-looking two-humped shape. And the story it tells is simple.

On the left side, there are a lot of apartments that most of us do not quality for.

On the right side, there are a lot of apartments that most of us cannot afford.

What’s left over is a relatively small slice in the center, which is what the majority of apartment seekers are fighting over.

I am certainly not against rent regulation. Without it, NYC would become segregated along socioeconomic lines. And there have been enough examples, such as Chicago in the 1980’s, showing why that is not a good idea.

However, I think an important part of the rent regulation debate has been left out – what is left over for the middle class.

4/1/2015 Update: Based on several responses I have received, I would like to clarify that the problem of access to rent regulated apartments is more complex than just income limits. Availabilities are infrequent because people who have them are disincentivized from leaving. And when they do become available, access often goes to “insiders” with the right relationships.

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