Inflation: 4 reasons why your rent is going up

Suspension

Rents are rising nationwide. Average listings for rents jumped 14 percent last year, to $1,877 a month, with cities like Austin, New York and Miami posting increases of 30 to 40 percent, according to real estate firm Redfin.

“Rents really rose in the second half of 2021,” Daryl Fairweather, chief economist at Redfin, told The Washington Post. “The pandemic was a kind of pause in the economy, now that things are reopening, inflation is starting to go up, rents are going up and people are realizing they don’t have as much disposable income as they thought.”

Many Americans say they see big swings as they prepare to renew their lease contracts. What is behind these increases? Here are four reasons why your monthly payment will go up.

What do you know about inflation: hitting price hikes in the US, around the world

1. Demand boom as more people want to live on their own.

Simply put, the demand for rents is rising. As the pandemic grows, more people are looking for their own space: Young people who have met their parents at record rates are moving in. People who have roommates now want to live on their own. Every couple who is separated or divorced needs a place of their own.

“Over the past year, families have started to split into smaller families,” said Igor Popov, chief economist at Apartment List, an online rental marketplace. “People realized that they wanted their own space and flexibility, so all of a sudden you had people who were going to share accommodation in a normal environment looking for individual units.”

Rents have risen more than 30 percent in some cities, forcing millions to find somewhere else to live

At the same time, the pipeline of new rents stopped. The supply chain disruptions associated with the pandemic along with shortages of both workers and materials have led to widespread delays in construction, resulting in a classic case of low demand and shortage of supply driving up prices.

The number of American households increased by 1.48 million in the past year, according to Census data, as more people branched out on their own.

After spending the early months of the pandemic living with a roommate in Jacksonville, Florida, Erica Santiago recently moved to Tampa on one condition: her own apartment.

Santiago, a writer at a marketing company, says she is tired of worrying about exposure to the coronavirus and other distractions while working from home. She now pays about $1,500 for the one-bedroom apartment she shares with her two cats, Sushi and Wasabi.

“I’ll say, I’m so happy to be on my own now,” said the 27-year-old. “Aside from not worrying about contacting covid, I don’t have to worry about other things either: Are they playing music while I’m working on Zoom? Is their friend over? Can I work in peace? It all becomes much more important.”

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2. An expensive – and competitive – housing market has shut down many potential home buyers.

The housing market has become incredibly competitive during the pandemic. The median home sale price rose about 17 percent last year to a record $346,900, according to the National Association of Realtors. But with the wealthy snapping up second homes and investment properties, home ownership is increasingly out of reach for many more. NAR estimates that nearly one million renters in the United States were priced out of the housing market last year due to higher prices and competition from all cash offers.

As a result, the share of first-time home buyers has fallen to its lowest level in eight years, which means more people are renting homes for longer than they otherwise would. This gave landlords and management companies great leverage to increase rents.

Casey Holmes, who pays about $1,800 for a three-bedroom home near Austin, was hoping to buy now. But the booming housing market has been priced in. Suddenly, he says, his $300,000 budget seems inadequate in a region where the median sales price rose more than 30 percent to $476,700 in the past year, according to the Austin Board of Realtors.

“I’ve looked around a bit and can’t see myself buying a house here anymore,” said the 37-year-old. “Instead, I’m renting for a lot longer than I thought.”

What do you know about inflation: hitting price hikes in the US, around the world

3. The expiration of rent freezes and other measures that helped keep rents low early in the pandemic.

Early in the pandemic, many cities, states, and management companies placed limits on rent increases, and in some cases froze prices completely. But with those measures expiring, many tenants say landlords are considering a two-year rent increase.

Last year when a local rent freeze was lifted in Frederick, Maryland, Alexei Valentine and his husband received notice that their monthly rent would rise by $300, or nearly 25 percent, well above previous increases. The building also incurred about $200 in additional fees for amenity, which made a one-bedroom unaffordable for PhD students. They ended up moving into a studio apartment in a neighboring county.

“We’ve been really struggling,” he said, “but then you see the rent go up by hundreds of dollars, and there’s no way.” “It’s not like our salaries have gone up that much.”

The pandemic has led to seismic shifts in the way people work and live. Among them: an opportunity for white-collar workers, particularly in higher-paying industries like technology and finance, to work from anywhere. As a result, experts say, some people are starting to move from expensive hot spots, like San Francisco and New York, to more affordable enclaves, like Nashville and Tampa. They often choose to rent until they find out where to buy on a permanent basis.

“All of the sudden, higher-paying jobs have given people a great deal of flexibility to move,” Popov said of the apartment listing, noting that there’s been an influx of renters looking for one- to six-month leases as they try out new cities. “It’s this richer demographic that’s driving a lot of the enthusiasm in the rental market right now because they’re the ones with the dollars to compete for the limited inventory out there.”

The report says that owning is more affordable than renting in most housing markets

Lauren Wolf, who moved from San Francisco to Austin early in the pandemic, was amazed at how much she could afford in Texas. She found a two-bedroom apartment with parking for $2,100 – less than she paid for her California studio.

Wolf, events manager for a technology company, plans to rent for a year and then buy.

But she says rising home prices and general economic uncertainty have prevented her from collapsing. Her plans were further delayed a few weeks ago when her monthly payments rose 30 percent to $2,775 a month.

“Rents have gone up a lot,” said the 26-year-old. “A lot of people I know have to move out of town.”

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