A Las Vegas bartender coping with a recent cancer diagnosis is fearing eviction. A young professional in Tucson is skipping car payments to afford her higher rent. A researcher in Miami signed the lease for her new apartment sight unseen. But no one is safer from US rental crisis.
Published in Bloomberg on 11 August 2022
Rental costs in the US are soaring at the fastest pace in more than three decades, surpassing a median of $2,000 a month for the first time ever and pushing rents above pre-pandemic levels in most major cities. Increases are particularly steep in metropolitan areas that saw large influxes of new residents during the pandemic, but the rental market is sparing almost nowhere and no one.
While the affordability crisis in the US is not new, it has snowballed over the past year as people returned to big cities and some areas short on housing supply saw a boom of new residents. Demand for rentals has soared, with many would-be homebuyers backing out of the market after mortgage rates jumped this year as a result of the Federal Reserve’s aggressive interest-rate hikes.
Tight inventory is leading to bidding wars, typically more a fixture of the homebuying market. Rising costs and a shortage of available units are giving landlords the leverage to hike rents at all price points. And the end of the federal eviction moratorium, combined with dwindling rental assistance, has forced people to make tough choices.
“It’s pretty much the perfect storm for renters right now,” said Kate Reynolds, principal policy associate at the Washington-based Urban Institute. “Those renters and their landlords don’t have a place to turn if they’re unable to pay the rent.”
Many renters, who typically spend a greater share of their income on housing than homeowners, are already struggling to keep up with larger bills at the grocery store and the gas station thanks to inflation running near the highest in four decades. And rent hikes are expected to persistently push inflation higher, since leases are staggered and renters face shocks at different times. Shelter costs account for about a third of the closely watched consumer price index, which increased by 8.5% in July from a year earlier, according to Labor Department data released Wednesday.
People of color and those with lower incomes are the most affected by the increase in rent prices, since they account for the majority of renters. In the US, about 58% of households headed by Black adults rent their homes, along with nearly 52% of Latino-led households, according to a Pew Research Center analysis of census data. In comparison, about a quarter of households led by non-Hispanic White adults, and a little under 40% of Asian-led households, are rentals. Some 54% of renters earn less than $50,000, and the annual median household income among renters is about $42,500, below the national median of $67,500, according to Zillow.
The problem is being felt around the world, too. A recent analysis by Bloomberg Economics found that 19 OECD countries have combined price-to-rent and home price-to-income ratios that are higher now than they were ahead of the 2008 financial crisis, indicating that prices have moved out of line with fundamentals.
Meanwhile, US landlords, including property investors snapping up a growing share of homes in metro areas, are gaining the upper hand.
Single-family rents rose by a record 14% nationally in May from a year earlier, according to CoreLogic, a real estate data firm. The increases were even more dramatic in cities that became popular living destinations during the pandemic, including an almost 40% increase in Miami, a 25% rise in Orlando, Florida, and a 17% jump in Phoenix.
Disclaimer: All the copyright credit goes to Bloomberg for this article. The content above represents only the views of the author or guest. It does not represent any views or positions of Commercial Realty Singapore and does not mean that Commercial Realty Singapore agrees with its statement or description, nor does it constitute any investment advice. For all actions taken by visitors based on information provided by the Commercial Realty Singapore community, the community does not assume any form of liability unless otherwise expressly promised in writing.