Rents are rising nationwide. Average rental listings jumped 14 percent last year, to $1,877 a month, with cities such as Austin, New York and Miami posting increases of 30 to 40 percent, according to real estate firm Redfin.
Many Americans say they’re seeing big swings as they prepare to renew their leases. What’s behind those increases? Here are four reasons your monthly payment is ticking up.
1. Booming demand as more people want to live on their own.
Put simply, demand for rentals is way up. As the pandemic wears on, more people are looking for their own space: Young adults who had hunkered down with their parents at record rates are moving out. People who had roommates now want to live alone. Couples who separated or got divorced each need a place of their own.
“Over the last year, households started to split up into smaller households,” said Igor Popov, chief economist at Apartment List, an online marketplace for rentals. “People realized they wanted their own space and flexibility, so all of a sudden you’ve got people who would’ve shared housing in a normal environment looking for individual units.”
At the same time, the pipeline of new rentals has stalled. Pandemic-related supply chain disruptions combined with shortages of both workers and materials have resulted in widespread construction delays, leading to a classic case of low demand and short supply driving up prices.
The number of U.S. households grew by 1.48 million last year, according to census data, as more people branched out on their own.
After spending the first months of the pandemic living with a roommate in Jacksonville, Fla., Erica Santiago recently moved to Tampa with one requirement: an apartment of her own.
Santiago, a writer for a marketing firm, says she was tired of worrying about coronavirus exposure and other distractions while working from home. She now pays about $1,500 for a one-bedroom apartment that she shares with her cats, Sushi and Wasabi.
“I will say, I’m very happy to be by myself now,” the 27-year-old said. “Aside from not having to worry about coming into contact with covid, I don’t have to worry about other things either: Are they playing music while I’m on Zoom? Is their boyfriend over? Can I work in peace? All of that has become a lot more important.”
2. A pricey — and competitive — housing market that has locked out many would-be home buyers.
The housing market has become incredibly competitive during the pandemic. The median home sale price rose nearly 17 percent last year to a record $346,900, according to the National Association of Realtors. But as the wealthy scooped up second homes and investment properties, homeownership has become increasingly out of reach for many others. The NAR estimates that nearly 1 million U.S. renters were priced out of the housing market last year because of rising prices and competition from all-cash offers.
As a result, the share of first-time home buyers has fallen to an eight-year low, which means more people are renting for longer than they otherwise would. That’s given landlords and management companies ample leverage to raise rents.
Casey Holmes, who pays about $1,800 for a three-bedroom house near Austin, had hoped to buy by now. But he’s been priced out by a booming housing market. Suddenly, he says, his $300,000 budget seems inadequate in an area where the median sales price has risen more than 30 percent to $476,700 in the past year, according to the Austin Board of Realtors.
“I’ve looked around quite a bit and I just cannot see myself buying a house here anymore,” the 37-year-old said. “Instead I’m renting for much longer than I thought I would.”
3. 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 altogether. But as those measures expire, many renters say their landlords are factoring in two years’ worth of rent increases.
Last year when local rent freezes lifted in Frederick, Md., Aleksei Valentín and his husband received notice that their monthly rent would be rising by $300, or roughly 25 percent, which was much higher than past hikes. The building had also tacked on about $200 in extra amenity fees, making the one-bedroom unaffordable for the doctoral students. They ended up moving to a studio apartment in a neighboring county.
“We were already struggling, but then you see that rent is going up by hundreds of dollars, and there’s just no way,” he said. “It’s not like our pay has gone up by that much.”
4. More wealthy renters.
The pandemic has led to seismic shifts in the way people work and live. Among them: the opportunity for white-collar workers, particularly in high-paying industries such as tech and finance, to work from anywhere. As a result, experts say some people are beginning to move from pricey hot spots, such as San Francisco and New York City, to more affordable enclaves, such as Nashville and Tampa. And they are often choosing to rent until they figure out where to permanently buy.
“All of a sudden high-paying jobs have given people a whole lot of flexibility to move,” said Popov of Apartment List, who noted that there’s been an influx of renters looking for one-to-six-month leases while they try out new cities. “That wealthier demographic is driving a lot of the heat in the rental market right now because they’re the ones with the dollars to throw around to compete for the limited inventory out there.”
Lauren Wolf, who moved from San Francisco to Austin early in the pandemic, was amazed by how much more she could afford in Texas. She found a two-bedroom apartment with parking for $2,100 — which was less than she’d paid for her studio in California.
Wolf, an event manager for a tech company, planned to rent for a year, then buy.
But she says rising home prices and overall economic uncertainty have kept her from making the plunge. Her plans got pushed back even further a few weeks ago when her monthly payment went up 30 percent to $2,775 a month.
“Rents have gone up so much,” the 26-year-old said. “A lot of people I know are having to move outside the city.”