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Rent control advocates say corporate homebuyers are driving up the costs of rentals, but that doesn’t capture the whole picture of what’s going on in the housing market.
Last week, rent control activists rallied on the steps of the state Capitol, demanding more affordable rent and an end to eviction for non-payment of rent. They claimed that rents are too high, and it’s the fault of corporate homebuyers. But real estate expert John Adams takes a closer look at what actually makes rental rates rise.
Adams says rising rents are part of the bigger story on inflation and the housing supply and demand crunch. The changes can be grouped into four major areas:
1. Millennials moving out of the basement
As the pandemic has started to wind down, the largest generation in the country today woke up and decided to move out of their parents’ basement. And all of a sudden, they are getting married, having babies, and needing a place to live on their own.
Simply put, there is more demand than supply. That applies to both homes for sale and homes for rent. That drives up rent.
2. Unsuccessful buyers forced to rent
Only one buyer can buy each house, and each house bought removes that house from the market when owner-occupied. All other bidders still compete with other would-be buyers. Unsuccessful bidders eventually abandon plans of owning, and resign themselves to renting. That decision drives up demand. And that drives up rent.
3. Overturn of the CDC eviction ban
The controversial eviction ban by the Centers for Disease Control and Prevention hit landlords especially hard. More than a few renters got a free ride while landlords were still required to pay taxes, insurance, and all the other costs of owning a home.
Once the Supreme Court overturned the CDC’s order, many landlords decided the market would bear a healthy rent increase to help them recover some of their lost income. And that drives up the cost of rent.
4. More high-income renters as economy recovers
The work from home trend has allowed many high income white collar workers to abandon their big city offices and move to areas featuring better quality of life and lower cost of living. And that includes the metro Atlanta area. Many of those relocating choose to rent first while they continue to work from home, and that drives up rent.
The bottom line is that some rent control advocates have blamed corporate purchases of rentals in metro Atlanta for driving up the price of rentals. But wishing and hoping don’t make it so. It’s true that investors have bought up lots of houses for use as rentals. But even corporate investors can’t set rental rates – instead, rents are determined by the law of supply and demand.
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