The kitchen in Krystal Guerra’s Miami condo is small, with broken tiles and warped cupboards, and there is no dishwasher.
Guerra, on the other hand, seemed unconcerned by the apartment’s flaws. She chalked it up to the perks of being a 32-year-old graduate student in South Florida, and she was content to stay for the time it took to complete her marketing degree in that location.
This all changed when a new owner purchased the house and informed Guerra that he was boosting the rent from $1,550 to $1,950, a 26% increase, which Guerra said would account for the majority of her take-home income from the University of Miami.
As for Guerra, he thought it was absurd and made the decision to leave. To pay my rent, I’m required to cut back on everything else in my life. That can’t go on.”
Is Guerra truly alone in this? Increasing rents have forced many Americans to dig deep into their savings, downgrade to less desirable apartments, or risk being evicted when a government ban on new construction expired.
According to a Realtor.com survey of residences with two or fewer bedrooms, the median rent in the 50 largest U.S. metro regions jumped by an incredible 19.3 percent from December 2020 to December 2021. A 49.8 percent increase over last year was seen in the Miami metro region, where the median rent rose from $2,450 to $2,850.
There were significant increases in the number of visitors to Florida’s three major cities (Tampa, Orlando, and Jacksonville) as well as the Sun Belt cities of San Diego and Las Vegas.
Inflation has become one of the country’s most pressing issues as a result of rising rents. Even if rents are rising at a slower pace, the Labor Department’s statistics shows that they are picking up as well. The Labor Department reported this week that the cost of renting an apartment increased by 0.5% in January over December. The growth was the largest in 20 years, and it is certain to continue.
Inflation is a concern for economists because of the influence of rent increases on the U.S. Consumer Price Index (CPI), which is used to assess inflation.
The year-over-year increase in inflation was 7.5%, the highest level in four decades. However, rising rents, which account for one-third of the consumer price index, might keep inflation high through the end of the year, according to several experts.
One Boston resident went viral after humorously listing an igloo for rent for $2,700 a month, nearly overtaking San Francisco as the nation’s second-most expensive rental market. Jonathan Berk clarified in a tweet that “heat/hot water” was not included.
Many variables, including a worldwide housing crisis, exceptionally low rental vacancies, and persistent demand as young adults enter the congested market, are to blame for sky-high prices, experts say.
Many young people returned to live with their parents after being evacuated from their own apartments due to the epidemic, according to Whitney Airgood-Obrycki, principal author of a Harvard University Joint Center for Housing Studies research. Rents “really went off” last year when the economy opened up and young people left, she added.
Rental vacancy rates in the fourth quarter of 2021 dropped to 5.6%, the lowest level since the fourth quarter of 1984, according to the U.S. Census Bureau.
Realtor.com’s Chief Economist, Danielle Hale, says that landlords have some pricing leverage since there are fewer rental vacancies than they are used to having.
With home sales at a historic low, rising property prices have forced many higher-income people to stay renters, driving up demand for housing even more.
As a result of material and labour limitations at the outset of the pandemic, construction teams are working hard to recover from a preexisting scarcity that has grown much worse, leaving an expected shortfall of 5.8 million single-family houses, a 51% increase from the end of 2019.
Investors, on the other hand, are becoming more and more prevalent.
A record 18.2 percent of U.S. house acquisitions in the third quarter of 2021 were made by organisations or institutions, Redfin said, as investors targeted Atlanta, Phoenix; Miami; Charlotte; North Carolina; and Jacksonville, Florida.
Rent increases, according to Hale, are partly caused by the growing influence of investors who, because to low vacancy rates, have pricing power. It’s not the only factor, she noted.
Rent regulation does not bind the majority of investors. According to the National Multifamily Housing Council, only California and Oregon have statewide rent control legislation, while New York, New Jersey, and Maryland have laws that allow local governments to establish rent control ordinances.
Local municipalities in some states, such as Arizona, are prohibited from regulating the fees that landlords can charge renters.
After a California developer recently purchased an apartment complex for the elderly and hiked rents by more than 50%, several individuals on fixed incomes were evicted from their homes in Tucson, Arizona, according to the city’s mayor’s office.
Legally, the monthly rent for a one-bedroom apartment in the building increased from $579 to $880.
A recent Senate Banking Committee hearing heard Arizona Sen. Kyrsten Sinema decry the increases, stating that her state’s fast rising housing costs had been a “big worry” for years.
Realtor.com’s economic forecaster Hale believes this year will see a slowdown in rent increases throughout the country because of increasing development.
In the words of Hale, “improving supply growth should help establish greater equilibrium in the market.”
To prepare for her March departure, Guerra has begun packing in Miami. There was no place she could afford that wasn’t “either really tiny, extremely broken down or an hour away from work and everyone I know,” she added.
Now she plans to store her belongings and move in with her lover, despite the fact that it’s not in the best of times.
That’s what Guerra said. “We didn’t want the decision of moving in together to be imposed upon us.” Despite our agreement, “it’s occurring before we had time to plan for it.”
The AP’s economics section This article was written by Christopher Rugaber in Washington, AP reporters Michael Casey in Boston and Anita Snow in Phoenix.