What’s Driving the Huge U.S. Rent Spike?

Rising rents 2021 Rent increases of 20% or more are making life difficult for low-income tenants in many cities, just as eviction bans and unemployment relief are running out. 

Valley King Properties, a Phoenix-area apartment rental brokerage, proudly proclaims on its website that it can help anybody find an apartment, “no matter what your situation is.” But that promise is proving hard to live up to these days, says Eric Atencio, Valley King’s regional manager. The red-hot rental market has made it impossible to place many would-be tenants with units moving off the shelf at record pace. 

“Our company is busier than it’s ever been, and we’re seeing more qualified people than we ever have struggling to find where the availability is at,” said Atencio. He advises tenants to be ready to act; these days, shoppers who look around for the perfect place often lose out.

“From 9 in the morning to 5:30 at night, the phone never stops,” he said. “Business is good but it’s taxing. There are just so many people who come in whose needs can’t be met in a market like this. It’s a landlord’s market.” 

The current spike in rents is most pronounced in places like the Phoenix metro area or Boise, where rents for two-bedroom apartments have climbed 15% and 21%, respectively, in the last year, per Zumper data. But those markets aren’t unique. It’s a nationwide phenomenon that’s having a significant impact on housing markets, affordability and access. 

Every one of the nation’s 100 largest metro areas has seen month-over-month rent growth over the last five months, according to Apartment List economist Christopher Salviati — a phenomenon he’s never seen before. Data from Zillow shows a similar national increase, up an average of 11.5%, or $200, compared to last August.

“We’re seeing an unprecedented level of rent growth,” Salviati said. “Our national index shows rents up 12.4% year over year, after a pretty modest dip early last year due to the pandemic.”

Gilbert, Arizona, a suburb south of Phoenix, saw rent skyrocket 24% between March 2020 to September 2021, said Jeff Andrews, data journalist at Zumper. Metro areas that are primarily single-family suburbs, such as Orlando and Atlanta, are also seeing big spikes (21% and 15%, respectively). 

“Home sales popped at the beginning of the pandemic because everybody went into the market all at once,” said Andrews. “The rental market is more of a slow matriculation. It takes a while for that backlog of renters to build up who should have cycled out of the market. It’s a combination of the housing market being insane, the cyclical nature of housing returning, and a lot of people who simply didn’t want to move during the pandemic, but now feel vaccinated and comfortable.” 

The timing of this rent spike, in many ways, couldn’t be worse. Most local eviction moratoriums have expired, and expanded unemployment assistance from recent stimulus bills has dried up just as the price spike for homes has pushed more high-income buyers into the rental market, adding to the competition for scarce supply. 

Landlords are raising rents, and those getting back into the housing market have been shocked by the sharp increases from just a year ago. Apartment List polls users when they register for the site, and the percentage of apartment seekers who have characterized their search as urgent has jumped 10% this year. 

Instability is rampant in the current rental market in Phoenix, said Alison Cook-Davis, associate director of research at Arizona State University’s Morrison Institute for Public Policy. Every open unit is flooded with multiple applications, and landlords are instituting annual rent increases in the hundreds of dollars. “There are so many people in need of housing and no housing to be had,” said Cook-Davis. “Everyone is also really concerned about more people being severely cost burdened, maybe taking on additional jobs or having to do more with less. It causes a lot of stress on those individual families.”  

The U.S. has long been behind on providing enough affordable housing options, said National Low Income Housing Coalition Vice President of Research Andrew Aurand, and the pandemic has exacerbated the problem further. While the federal government allocated $46 billion in emergency rental assistance, that relief has been slow to arrive in many parts of the country. “It’s a crisis,” he said. “Housing instability has a lot of detrimental impacts on families.” 

One of the more damaging aspects of the rent spike is that it limits the existing resources set aside to support low-income renters, says Deanna Watson, executive director of the Boise City/Ada County Housing Authorities. Her organization handles the housing choice vouchers program in the area, but only has enough to reach roughly 23% of those who need their help. The organization has spent roughly $13 million in emergency rental assistance since the beginning of March, but once this temporary Covid-related relief is spent, it’s gone, and can’t help the underlying issues of a shortage of units and elevated rents. Higher housing costs are pushing more people to or past the margins. An analysis of rental cost increases by Dwellsy found the cost of rent for Boise apartments in the 10% percentile of price, the most affordable, spiked 29%, more than the most expensive units.

“We’re seeing people experiencing first-time homelessness, who six months ago were doing fine,” said Watson.

Part of the issue is how the apartment market has shifted over the last decade. Today’s renters are impacted by the echo of the temporary but significant slowdown in new construction after the Great Recession. Those units, unbuilt due to a pause in construction, would have provided more slightly older and affordable options.  

There are some positive developments on the horizon. House America, a recently announced federal initiative to fight homelessness, aims to boost the number of affordable units by by at least 20,000 via partnerships with state and local governments. Multifamily construction is “robust” right now, says Whitney Airgood-Obrycki, a research associate at Harvard’s Joint Center for Housing Studies. The national pipeline of roughly 650,000 units is hitting levels last seen in the 1980s. But the issues that persisted before the pandemic have continued, meaning lower-income renters are the most likely to be impacted. 

Much of the new building is focused on high-income renters, said Caitlin Walter, vice president of research at the National Multifamily Housing Council, an industry group. From 2004, when homeownership in the U.S. peaked, to 2019, half the growth in the nation’s renter population was households making over $75,000 a year. “Workforce and naturally occurring affordable housing is what we need the most, and we couldn’t get that to pencil in before the rising cost of materials,” she said. 

It’s difficult to predict what comes next, as well; the delta variant has inserted fresh uncertainty about the pandemic, and a long-anticipated eviction tsunami has still yet to materialize. Salviati says that Apartment List data shows the vacancy rate slightly rising and growth rate slowing, so prices may stop accelerating at such a rapid clip, but there’s no indication prices will reverse, suggesting the affordability issues this rapid rent increase causes will be an ongoing concern. 

“RealPage data from August shows the occupancy rates for their apartments passed 97% for the first time ever,” said Airgood-Obrycki. “It’s really unprecedented, and hard to know where we go next.”

Source: Bloomberg CityLab