How record rent increases have cornered tenants – Forbes Advisor
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The record rental price spike in 2021 has left many tenants with a new conundrum: renewing their lease at a much higher rate, moving further afield in search of a cheaper rate, or financially plunging into a buyer’s market of house that is experiencing similar price jumps.
Median rent prices climbed 17.8% last year, sending shockwaves through the renter market that was accustomed to an average annual increase of just 2.3% from 2017 to 2019, according to the latest report from ‘Apartment List. In fact, rental rates have increased every month in 2021 except December, which saw a slight 0.2% drop from the previous month, barely making a dent in the winter season which has historically lowered rates. lower rental.
And the unprecedented rate increases last year are creating a significant shift in the mindset of tenants whose annual leases are approaching, especially those who have obtained Covid-19 rent relief or found an incredible offer when the apartments offered months of rent and free parking spaces. to encourage people to move amid the pandemic.
The conversation went “from people being unable to pay rent in 2020 because of the pandemic, to being unable to pay rent in 2021 because rent prices jumped 12% overnight,” says Rob Warnock, senior research associate at Apartment List.
What happened to the rental market post-Covid
Rent hikes are starting to create another shift in the housing market in terms of where people choose to live, a different move than when people fled the big cities hardest hit by Covid-19 in 2020 , preferring larger spaces in suburban areas or retreating with family members.
In 2020, the rate of household formation – a group of people living together – fell for the first time in decades. There were 128.5 million new household formations in 2020, down from just 128,000, but the first drop in any given year since 1984, according to Census Bureau data.
Part of this decline was due to adult children returning to live with their parents (or postponing their move for the first time), while elderly parents moved in with their adult children at the start of the pandemic.
But in 2021, household formation is accelerating again, with 129.9 million new households. This rise has put additional pressure on the already tight housing market as demand increases and availability decreases, and new construction experiences delays in supply (or supplies at a reasonable cost), so that what was on the market could not keep up with demand. All of these factors have given home owners and sellers even more leverage to raise prices in 2021.
And those rental prices have gone up in almost every city, whether it’s a major metropolitan area or more of a suburban one.
Cities with the strongest growth in rents
While many would expect major cities to have higher rental rate growth—New York leads the charts with a 32.8% jump in 2021—some unexpected cities have outpaced metropolitan areas historically. the most popular.
For example, Arizona had four cities among the top 10 cities with the highest nationwide rental rate increases in 2021: Scottsdale (31%), Mesa (29.6%), Phoenix (29% ) and Glendale (28.5%). Florida also dominated some of the most expensive rental rates with Tampa (32.6%), St. Petersburg (31%) and Orlando (30.3%) in the top 10 cities.
In areas that were already blooming before the pandemic, like Austin, Texas, where rental rates jumped 24.8%, housing experts say they are now seeing people leaving the popular city.
“Some people move to San Antonio to get more bang for their buck. I’ve even seen people go back to California because they weren’t getting the value they thought they were getting in Austin,” says Steve Hadifar, who has been helping renters find apartments in Austin for nearly a decade at Austin. Apartment Specialists. “In general, winter is usually better for apartment offers, but not this year. I’ve never seen anything like it.
In places like Tampa, where buyers have historically been attracted by low taxes and affordable housing, the median rent price for a two-bedroom apartment was $1,765 in 2021, or about $610 more per month. than a year ago and above the national average of $1,282. .
That made it difficult for Tampa tenant and freelance writer Stephanie Powers to decide whether to move her growing family to an equally expensive housing market or another expensive rental. The wife and mother of a five-year-old son says she feels stuck due to the lack of affordable housing options and that moving into a bigger space would mean paying almost double the rent she is currently paying .
“We can’t really afford to buy or rent in the neighborhoods we want in Tampa. We searched all the way to Plant City and even further north to Tallahassee,” Powers says. “If I have to pay New York prices, I’d rather live in New York.”
Cities with fastest growing rental prices in 2021
Conversely, the only major city in the country that saw an actual decline in its rental rate in 2021 was Oakland, Calif., with a 1% decline.
Where are the rental rates going?
While rental rates haven’t cooled over the winter as much as expected, Warnock says he doesn’t expect rates to rise as painfully as they have throughout 2021.
“I expect to see rental prices increase this year, but probably not at last year’s rate,” Warnock said. “Typically, prices start to rise again in March and April. Obviously, there’s a lot of uncertainty with the pandemic, but it won’t be like 2020 when people have completely stopped moving. »
Advice for tenants struggling with rising prices
As landlords try to recoup any financial losses they may have suffered in 2020, tenants have less leverage when it comes to negotiating in hot rental markets.
Some renters may need to live with roommates or forego certain amenities to reduce housing costs, while others may need to search in a different zip code.
Often a tenant can negotiate the price more by working with a family landlord who owns a home or condo, for example, rather than trying to haggle the price at a large, corporate-owned apartment building.
Brian Carberry, senior editor of Rent.com, says homeowners are looking for reliable, responsible tenants who will treat the space as their own. If you check these boxes and are willing to help around the house, you can negotiate a cheaper rent.
“Try including a larger security deposit or offer to do some basic maintenance around the house,” says Carberry. “For example, if you offer to mow the lawn yourself, you could save the homeowner $100 or more each month that they would have to pay someone to do it for them.”
However, some large, newly built apartment complexes may offer you a deal as they need to quickly fill the units within a certain amount of time. Look for areas that are still building housing or with buildings under construction and note the names of the buildings. The units may not yet be listed on general rental websites, but the building should have an individual website where they tend to post pre-rental promotions.
Rental apps can also be a great tool for staying up to date on deals and getting alerts on new rentals that meet your needs. In competitive markets where supply is low, it can be essential to act quickly to find something you can afford.