Americans Priced Out as Rental Rates Spike

Apartments are advertised in lower Manhattan in New York City on April 16, 2021. (Spencer Platt/Getty Images)

Rents across the United States have been increasing over the past several months, adding economic pressure on millions of households.

In January 2022, rent for 0–2 bedroom properties rose by 19.8 percent year-on-year, according to a report published by Realtor on Feb. 22. This was the eighth straight month in which the rent for these properties grew by double digits. In December, rents for 0–2 bedroom properties had risen by 19.3 percent year-on-year. The median rent in America’s 50 largest metros climbed to $1,789 in January.

The monthly mortgage cost of a starter home in the 50 largest metro areas rose by 11 percent year-on-year to $1,867 in January.

When compared to renting, buying a home was more affordable in 26 of the 50 largest metros. In markets where buying is favored, purchasing a home was roughly $323 per month cheaper than renting.

Rent for the entirety of 2021 was also higher than the previous year. “In 2021, the average year-over-year growth in median asking rents for 0–2 bedrooms properties was 10.1 percent, higher than our 2022 forecasted growth (7.1 percent),” Realtor’s Jan. 26 report said.

“The most significant year-over-year rent growth was seen among two-bedroom units, with an average rate of 11.7 percent. The average growth for one-bedroom units was 10.0 percent, and the growth rate for studios was 6.1 percent.”

Two factors are believed to be driving rent prices up: low rental vacancies and higher investor purchase of homes. The rental vacancy rate during Q4 2021 inside metropolitan areas fell to its lowest level since 1984 at just 5.4 according to the U.S. Census Bureau.

Investors made up 18.2 percent of homebuyers in the country during the third quarter. Due to the low vacancy rate, investors get pricing power in the rental market, pushing rents up even higher.

The rising rent cost is eating into the monthly budget of Americans. Krystal Guerra, 32, was looking forward to residing at her Miami apartment for a couple more years. However, a new owner of the property dashed her hopes after raising the rent 26 percent, from $1,550 per month to $1,950.

“I thought that was insane,” Guerra told The Associated Press. “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.”

She decided to move out of the apartment by March but is finding it difficult to find an affordable home. All Guerra could find were places that were “either incredibly small, incredibly broken down, or an hour away from work and everyone I know.”

Compounding the problem of rising rental prices is the shortage of inventory. In Atlanta, real estate agent Jamie Douglas is unable to take in new clients as there are fewer homes to rent out.

Before, her usual clients would spend roughly $2,500 per month on rent, but she now works with clients who can spend at least $5,000 a month. A house usually attracts around 15 to 20 applications and tends to get rented out in just a day. “I literally have people begging me to get them a rental,” Douglas said in an interview with Bloomberg. “It’s just so crazy down here.”

The trend of higher rent prices may not end anytime soon. Rent inflation is expected to increase by 3.4 percentage points in 2022 and 2023 relative to the five-year pre-pandemic average, according to a Feb. 14 report by the Federal Reserve Bank of San Francisco.