Rents are reaching ‘insane’ levels in the US with no end in sight

Kristal GuerraThe Miami apartment has a tiny kitchen, cracked tiles, warped cabinets, no dishwasher and hardly any closet space.

But Guerra was okay with the apartment’s flaws. It was all part of being a 32-year-old graduate student in South Florida, she explained, and she was happy to live there for a few more years as she completed her degree in marketing.

That was until a new landlord bought the property and told him he was raising the rent from $1,550 to $1,950, a 26% increase which Guerra said meant his rent would be the majority. of his take home pay from the University of Miami.

“I thought it was crazy,” said Guerra, who decided to move on. “Am I supposed to stop paying for everything in my life just so I can pay rent? It is unbearable.

Guerra is not alone. Rents have skyrocketed across the country, forcing many people to dip deep into their savings, downsize to below-average units or fall behind on payments and face deportation now that a federal moratorium has ended.

In the 50 largest metropolitan areas in the United States, the median rent increased by 19.3% from December 2020 to December 2021, according to one of the properties with two bedrooms or less. And nowhere was the jump bigger than in Metro Miami, where median rent soared to $2,850, 49.8% higher than a year earlier.

Other cities in Florida – Tampa, Orlando and Jacksonville – and the Sun Belt destinations of San Diego, Las Vegas, Austin, Texas and Memphis, Tennessee, all saw spikes of more than 25% during this period.

Rising rents are a growing driver of high inflation which has become one of the country’s main economic problems. Data from the Labor Department, which covers existing rents as well as new listings, shows much smaller increases, but those are also accelerating. Rental costs rose 0.5% in January from December, the Labor Department announced last week. It may seem small, but it’s the biggest increase in 20 years and it’s likely to accelerate.

Economists worry about the impact of rent increases on inflation, as sharp increases in new leases fuel the US consumer price index, which is used to gauge inflation.

Inflation jumped 7.5% in January from a year earlier, the largest increase in four decades. While many economists expect this to decline as pandemic-disrupted supply chains crumble, rising rents could keep inflation high until the end of the month. year, because housing costs represent one third of the consumer price index.

Things got so bad in Boston, which nearly overtook San Francisco as the second most expensive rental in the country Marlet, that a resident went viral for jokingly putting an igloo on the market for $2,700 a month. “Heating/hot water not included”, Jonathan Berk tweeted.

Experts say many factors are responsible for skyrocketing rents, including a nationwide housing shortage, rock-bottom vacancy rates and relentless demand as young adults continue to enter the crowded market.

Whitney Airgood-Obryckimain author of a recent report from the Joint Center for Housing Studies at Harvard University, said there was a lot of “pent-up demand” after the first months of the pandemic, when many young people returned home with their parents. Since last year, as the economy opened up and young people moved out, “rents have really taken off,” she said.

According to United States Census Bureaurental vacancy rates in the fourth quarter of 2021 fell to 5.6%, the lowest since 1984.

“Without a lot of vacant units that landlords are used to having, it gives them some pricing power because they’re not sitting on empty units that they need to fill,” said Danielle HaleChief Economist of Realtor.com.

Meanwhile, the number of homes for sale hit an all-time high, contributing to soaring home prices that caused many high-income households to stay renting, further increasing demand.

Construction crews are also trying to bounce back from material and labor shortages that at the start of the pandemic further exacerbated the pre-existing shortage of new homes, leaving an estimated $5.8 million shortfall. single-family homes, a jump of 51% compared to the end of 2019, Realtor.com said.

And the growing presence of investors could make all this worse.

A record 18.2% of U.S. home purchases in Q3 2021 were made by businesses or institutions, according to Redfinas investors targeted Atlanta, Phoenix, Miami, Charlotte, North Carolina and Jacksonville, Florida, popular destinations for people moving from more expensive cities.

Hale said the growing presence of investors is a factor driving up rents, but only because they have pricing power due to low vacancy rates. “I don’t think it’s the only driver,” she said.

Most investors are not bound by rent control. According to National Multifamily Housing Council.

And laws in some states like Arizona actually prevent local jurisdictions from limiting what landlords can charge tenants.

In Tucson, Ariz., the mayor’s office said it was inundated with calls from residents worried about rent hikes after a California developer recently bought an apartment complex intended for seniors and raised rents. rents by more than 50%, forcing many people on fixed incomes. .

Rent for a one-bedroom apartment in the complex has increased from $579 to $880 per month, a legal increase under Arizona state law.

Arizona Senator Kirsten Sinema decried the increases at a recent Senate Banking Committee hearing, saying rapidly rising housing costs in Arizona had been a “major concern” for her for years.

Nationally, Hale, the economist at Realtor.com, expects rents to continue rising this year, but at a slower pace, thanks to increased construction.

“Improving supply growth should help create a better balance in the market,” said Hale, who predicts rents will rise 7.1% in 2022.

In Miami, Guerra began packing her things ahead of her March move date. She spent weeks frantically searching for places in her budget, but said she couldn’t find anything that wasn’t “either incredibly small, or incredibly broken down, or an hour away from work and everyone that I know”.

Her plan now is to pack up her things and move in with her boyfriend, even if the timing isn’t ideal.

“We didn’t want the decision to move in together forced on us,” Guerra said. “We wanted it to be something we accepted, but it happened before we wanted it to happen.”

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Republished with permission from The Associated Press.


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