rent in America is getting more expensive no matter where you
live. rent growth is accelerated coast to coast in big cities,
Rural areas. East West, South North is across the entire
economy. The areas
where we are seeing the strongest rent growth are in
places like Austin, Texas.
Yeah, so my name is Maria and I live in Austin, Texas. During
the pandemic, a lot of people began to leave. And actually,
the rent dropped that year. By $100. I am due to renew my rent,
and there was a spike of $400.
Making matters worse, few of the new homes and construction are
affordable,
rental demand continues to be extremely strong. And the rental
units that are being built are the more expensive ones, that is
the higher end ones.
Meanwhile, workers' pay isn't increasing enough to match the
new rent.
We had wage supression for 40 years. And then we have the
period now where wages are growing, especially at the low
end. And so the question is, how long will that continue?
Experts say the rent increases will have an impact on the
economy.
A lot of the monthly expense for the typical household is money
that's going toward the rent, or to upkeep of the house. So it is
a very important part of all of consumer expenditures.
In the most competitive markets. Rents are creeping toward record
highs, renters in smaller markets are feeling the squeeze
too. For example, one-bedroom rentals in Gilbert, Arizona
spiked over 116% In the past year. Meanwhile, rent for a
single-family home is growing at its fastest pace since 2005.
According to CoreLogic. So how did we get here? One answer is
the bounce back from the pandemic.
You saw tech companies, major firms moving to smaller cities,
cities like Pittsburgh, Austin, San Antonio, Charlotte, these
are cities that really started booming because workers had more
flexibility. And when the city starts booming, of course, the
rents go up because it's a supply and demand issue.
But the story goes back further than that, all the way back to
the Great Recession.
President Obama you listening? This has been building really
since the end of the financial crisis back a little over a
decade ago, a lot of communities have made it more difficult to
build more homes closer to the urban cores, building materials,
particularly lumber has been in short supply. That's been a
problem of labor. You know, a lot of people left the
construction trades in the housing bust back a decade ago.
And because of changes in foreign immigration laws, we
have a lot fewer foreign immigrants coming into the
country, many of those folks would work in the construction
trades. Also a lot of smaller builders, they rely on loans
from banks. And since the financial crisis, banks,
particularly smaller banks, midsize banks, have been unable
to because of regulatory changes and other reasons unable to to
provide enough loans. So you know, there's a melange of
things going on here.
After the financial crash of 2008. house building stalled by
the end of the 10s. Renters had fewer options, especially in
real estate hotspots
pre-Covid, we saw a huge rush to urban centers, millennials love
to live in cities longer, they were actually living there
longer than the previous generations their age had
because they weren't able to get out and afford to buy homes
because home prices were so high. So you had so much demand
in the cities,
then the pandemic hit.
So if you look at some of the high rise apartment buildings in
the really dense central business districts of the big
cities spreads were actually declining in the first 12 months
of the pandemic. But
smaller cities like Phoenix and Austin received more of those
remote workers. That's an prices upward for people like Maria
right now, I would say for a studio is probably $2,000. This
place it's a one bedroom was originally set at 1700. When I
first moved in,
Maria is a teacher and needs to commute to work every day, she
and many other Americans don't have the luxury to move further
away from work to save cash that's creating wider issues in
the economy.
There's a lot of evidence that the lack of housing closer to
where the demand is and urban cores is having a meaningful
negative consequence on long term economic growth so we can
figure out a way to change zoning rules and laws and get
the lumber and land and labor that we need are able to build
closer where the jobs are, you know, our economy will be able
to grow more quickly more strongly in the longer run.
renters in the traditionally cheaper suburbs are feeling the
burden too. economists say that finding any home to rent right
now is uniquely difficult.
Because the vacancy rates are really so low. It's the lowest
we've seen in the generation.
Coming out of the pandemic, it's likely for rents to keep rising.
Fortunately, builders are ramping up their building, they
can make a lot of money, you know, with rents this high and
house prices this high. So they have a lot of incentive to put
up more homes. And that's happening slowly but surely we
are seeing more homes put up. So that's a good sign.
And we've seen an increase in single family housing starts.
That's really important, because that's the preferred housing
structure during the pandemic, so having investors come in
buying homes might maybe puts a little upward pressure on home
prices. Sure, maybe it does. But it does increase the stock of
single family rental homes available in the market, and
should help to moderate rent growth.
And in the cities, some realtors are weighing whether to convert
their less busy office districts into residential neighborhoods.
The idea is to say that there are some empty buildings, you
know, brick and mortars already established, but maybe one can
repurpose it into residential units.
For the short term, renters are dealing with the market.
If I had signed the lease I would have it would be taking a
lot of my savings and so I decided to move to a new
building. I'm losing about 150 square feet.
These hikes are hitting us citizens at an inopportune time.
over decades, wages for most workers have stagnated.
The wages and benefits of a typical worker were suppressed
in the period. For decades after 1979 growth was very slow. There
was growing inequality that worked against the middle; in
effect against anybody in the bottom 90%.
In 2019, Oregon became the first state to impose statewide rent
control. They cap increases at about 7%. cities like New York,
San Francisco and Washington DC. Also limit rent increases, these
policies have some benefits. One study found that renters were
about 20% more likely to stay in their homes with rent control.
Other economists think that rent control does more harm than
good.
So what history has shown is that by putting a rent control,
yes, its benefit temporarily for people to pay lower rent, but
that deters incentive to build more homes or provide money for
maintenance. So all the housing stock steadily deteriorates over
time, and one does not want to see that. So we want to
encourage more production, the
answer to rising rents may be in the job market. both Congress
and the Fed have pumped stimulus into the economy, it should
eventually help some workers earn higher wages,
there's been a huge increase in the demand for goods and
services. So we're gonna see a period of sustained low
unemployment. This has always led to faster wage growth for
those in the middle and the bottom. The other related
question is, will we see the structural changes, then I'll
build us into the economy rather than be an episode of a period
of low unemployment. And I think that will require improving
labor standards. So you know, putting in the $15 minimum wage
and rebuilding collective bargaining, I think that will
mean paying attention to maintaining low
unemployment, which means that the answer to rising rents might
be getting yourself a raise, or finding roommates.
They're not building enough affordable housing right now
because for builders, the cost of construction is so high, due
to a high cost for land labor materials shortages, for
materials, shortages of labor, that they can't build affordable
housing.
You know, it took us 10 years to get into this predicament. It's
not going to be solved next year or the year after it's, it's
gonna be 10 years before we solve this problem.