Krystal Guerra’s Miami apartment has a tiny kitchen, cracked tiles, warped cabinets, no dishwasher and hardly any storage space.
But Guerra was fine with the apartment’s shortcomings. This was part and parcel of being a South Florida 32-year-old graduate student. She said that the apartment was her home for as long as she wanted to finish her marketing degree.
Then Guerra, the new owner of the property, told Guerra that the rent was going up from $1550 to $1950. This 26% increase meant Guerra would have to pay her rent.
[time-brightcove not-tgx=”true”]
“I thought that was insane,” said Guerra, who decided to move out. “Am I supposed to stop paying for everything else I have going on in my life just so I can pay rent? That’s unsustainable.”
Guerra isn’t the only one. The country has seen rents explode, leading many people to tap into their savings and downsize to smaller units, fall behind in payments, or risk being evicted.
A Realtor.com analysis found that the median rent in fifty of the most populous U.S. metropolitan areas rose by an astonishing 19.3% between December 2020, and December 2021. The Miami metropolitan area saw the largest jump, with the median rent jumping to $2,850. This is 49.8% more than last year.
Other cities across 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 that time period.
Rising rents are an increasing driver of high inflation that has become one of the nation’s top economic problems. The Labor Department’s data covers both existing and new rents. However, these increases are smaller, they are still increasing. According to the Labor Department, rental costs increased 0.5% between December and January. This may sound small but this is the highest increase since 2000 and it will probably continue.
Because rent rises can have a negative impact on inflation, economists are concerned about how they will affect inflation. The big increases in leases contribute to the U.S. Consumer Price Index which measures inflation.
1.5% increase in inflation, the largest rise in over 40 years. Although economists anticipate that it will fall as the supply chains to pandemic-disrupted disruptions unravel, increasing rents may keep inflation high until the end of 2011, since housing costs account for one-third the consumer price index.
Things have gotten so bad in Boston, which has nearly overtaken San Francisco as the nation’s second-most expensive rental market, that one resident went viral for jokingly putting an igloo on the market for $2,700 a month. “Heat/ hot water not included,” Jonathan Berk tweeted.
Experts believe there are many reasons for the skyrocketing rents. There is a national housing shortage and very few rental vacancies. Young adults also continue to be in demand, which can lead to unrelenting competition.
Whitney Airgood-Obrycki, lead author of a recent report from Harvard University’s Joint Center for Housing Studies, said there was a lot of “pent-up demand” after the initial months of the pandemic, when many young people moved back home with their parents. Starting last year, as the economy opened up and young people moved out, “rents really took off,” she said.
The U.S. Census Bureau reported that the rental vacancy rate in the fourth quarter 2021 was 5.6%. This is the lowest level since 1984.
“Without a lot of rental vacancy that landlords are accustomed to having, that gives them some pricing power because they’re not sitting on empty units that they need to fill,” said Danielle Hale, Realtor.com’s chief economist.
In the meantime, there has been a decline in homes on sale. This contributed to skyrocketing home prices, which have forced many households with higher incomes to rent, further increasing their demand.
Also, construction workers are trying to recover from shortages of material and labor that made an already existing shortage of homes worsened by the pandemic. Realtor.com estimated that there was an estimated shortage at 5.8 million homes. This is 51% more than the ending of 2019.
Potentially compounding this all is the growing presence of investors.
A record 18.2% of U.S home purchases in the third quarter of 2021 were made by businesses or institutions, according to Redfin, as investors targeted Atlanta, Phoenix, Miami, Charlotte, North Carolina, and Jacksonville, Florida — popular destinations for people relocating from pricier cities.
Hale stated that the rising presence of investors has a significant impact on rent increases, however they are only able to price their properties at a lower rate due to low vacant homes. “I don’t think that’s the only driver,” she said.
Most investors aren’t tied down by rent control. Only two states, California and Oregon, have statewide rent control laws, while three others – New York, New Jersey and Maryland – have laws allowing local governments to pass rent control ordinances, according to the National Multifamily Housing Council.
Arizona, for example, has its own laws which restrict local jurisdictions’ ability to charge landlords a maximum amount of rent.
In Tucson, Arizona, the mayor’s office said it has been deluged with calls from residents worried about rent hikes after a California developer recently bought an apartment complex that catered to older people and raised rents by more than 50%, forcing out many on fixed incomes.
A one-bedroom apartment with a view in this complex was available for rent at $880 per month. That is an increase that Arizona law allows.
Arizona Sen. Kyrsten Sinema decried the increases during a recent Senate Banking Committee hearing, saying Arizona’s rapidly growing housing costs have been a “major concern” of hers for years.
According to Hale (realtors.com economist), rents will continue rising nationally this year but at a slower rate due to the increased construction.
“Improving supply growth should help create more balance in the market,” said Hale, who forecasts rents to rise 7.1% in 2022.
Guerra, a Miami resident, has been packing up her belongings in advance of the March move-out. She spent weeks frantically looking for places in her budget but said she couldn’t find anything that wasn’t “either incredibly small, incredibly broken down or an hour away from work and everyone I know.”
Her plan now is to put her things in storage and move in with her boyfriend, even though the timing isn’t ideal.
“We didn’t want to have the decision of moving in together forced upon us,” Guerra said. “We wanted it to be something we agreed to, but it’s happening before we wanted it to happen.”
___
Christopher Rugaber (Associated Press Economics) in Washington contributed to the report. Michael Casey, Boston AP writer and Anita Snow (Phoenix AP writer), also contributed.
