U.S. rents surge, leaving behind generation of younger workers

(Reuters) -The cost of renting a home in the United States is surging and young workers have felt the sharpest pain, many of them taking on additional jobs or roommates to afford housing costs.

Household rents in 2021 jumped 10% from pre-pandemic levels, according to Census Bureau estimates released last week. The figures came as rising healthcare and rental costs pushed U.S. consumer prices up unexpectedly last month.

The data from the bureau’s annual American Community Survey put median U.S. rent at $1,037 in 2021, up from $941 in 2019. Year-over-year increases in the median household rent over the past decade were typically 2% or 3% - one exception was the 5% rise from 2018 to 2019 . . . Adding to renters' woes, rents in the professionally-managed sector - usually larger properties operated by management companies - have risen even more dramatically.

Annual rent growth there hit 11.6% at the end of 2021 and start of 2022, about three times what it was in the five years prior to the pandemic, according to the Harvard Joint Center for Housing Studies. At the same time, vacancy rates fell to their lowest since 1984 as post-pandemic demand surged . . .

I agree that it is consequences of their actions.

Yes, but recession is coming. What do you think happens to rents then, and after that ...?

A combination of things. Inflation makes your money worth less and each dollar buys less, so each rental dollar buys less for the tenants. I think this is the biggest cause of rents going up.

When the government decided that rent moratorium was a good thing, the construction of rentals stopped and some landlords converted their residential rentals into something else and stopped renting to tenants. Apartment complexes were going up in droves in my area, but the second Covid rent moratoriums hit, the apartment and housing starts stopped dead. No apartment buildings going up now and very little new construction houses.

Consider this:

Recession is now imminent. There will be loss of jobs. People will double up, stay with relatives, move onto the streets, maybe even move to lower cost communities/states, and rents will go down.

When inflation improves, then what? Will rents go back up? At the same pace as they are currently going up? What will happen to units whose prices were dropped? Will they regain their previous prices? What about their previous momentum?

An interesting dynamic of the situation in CA is that of vacancy decontrol. Vacancy decontrol allows landlords to raise rents to market value whenever a unit becomes vacant. So, if rents are forced down by recession, and landlord rents out the unit at recession-level market price (which will be lower than August's price), then he may be stuck withe that price as his baseline for rent control.

What should a landlord do? Take the best rental price he can during the recession, or let his rental go tenant-less until inflation abates and rental prices return to their previous highs?

Sorry but don't feel sorry for the under 30 set. They already feel like they should only have to work 30 hours or less a week, make top wages and put on little or no effort. "Quiet quitting" and so forth. They take out huge student loans for worthless degrees (I blame the universities and parents who fill their kid's heads with pipe dreams for this one).

This is my 45th year of working at least two jobs. Had two kids and went straight back to work; no time for bench warming at university.

>>>Policies of rent and eviction moratoriums have consequences>>

This EXACTLY.

What did the rent moratoriums do? Killed or folded middle class owned rentals all over the country, especially the smallest ones. Consolidated property under rental giants, who mopped up the dead at closeout prices.

Meanwhile the tenants got screwed just as much. Everyone who took the bait and skipped rent a year now have their credit destroyed so they'll never get a mortgage, if even find a place willing to rent to them. Not that they don't deserve it in many cases.

Mission accomplished.

Not just that but landlords are far more jittery and nervous with applicants now. I was willing to take a chance on people before 2020. Probably will never be that reckless in screening again.

Moratoriums were basically a scam, and the corporate media was in on it, demonizing landlords and hiding the real aim- to wipe out the real aim- property consolidation by the 1%. If they really had wanted to help people they would have just put emergency funds into the Section 8 voucher program, and given free housing to the 'deserving' after the government actually looked them over. Not just tell the entire country not to pay rent. "But I digress!"

Alas, there seems to be no one on this site capable of any analysis of the course of the coming recession.

Recession is now imminent. There will be loss of jobs. People will double up, stay with relatives, move onto the streets, maybe even move to lower cost communities/states, and rents will go down.

When inflation improves, then what? Will rents go back up? At the same pace as they are currently going up? What will happen to units whose prices were dropped? Will they regain their previous prices? What about their previous momentum?

I submit that, with the loss of jobs, rents will go down. Not all of them, but yes to the low-cost rentals that have sustained the majority of the rent inflation. I further submit that these rental prices will NOT go up to the same level that they are at now, because the money won't be there (at least for a while). The momentum for price increases may stlll exist but at a lower level.

Robert[ON], your posting doesn't even address the question.

This situation is NOT unpredictable, and you look at such silly items as separating out utilities as a dumb approach to the very real problem.

For those in danger of losing their rent control baseline, there are tried and true methods, such as being good to your tenants so as not to incur vacancies during the recession. Offer them gifts that will preserve your baseline and don't encourage them to leave. And, only a dope would think of raising the rent under these circumstances. The last advice you need is that the landlord is in charge, the tenant isn't.

If people don't have their jobs, then what do they do for a place to live? Well, some of course have extra money, and some live paycheck-to-paycheck, and if the paycheck stops, then is it any help to cite the old adage about people needing a place to live? How many such people, and what will they be able to afford?

How much can you save by separating utilities? Does it depend on how much rents will decrease? More serious advice might be to convert your month-to-month obligations into leases, maybe even multi-year, if you think that there is money to support it. Remember that no only will lots of jobs meed laying-off, but commissioned services and self-employment will bring in less cash. The whole economy will need to be seriously dampened in order to break the inflation cycle.

Rents are still surging here in CA too, but I have already seen reports of declines in momentum of rental increases from smaller communities.

Silliness is as silliness does. Do you have any serious reasons for expecting RI rents to continue surging, despite the latest and expected next interest hikes?

" during a reccesion job growth will be less "

Maybe, because Canada does not have an economy of its own, its easy for Canadians to fantasize about the world around them without recognizing the reality.

America is about to undergo a RECESSION. Canadians don't understand what that is, because their economy depends on the US, so they just blame the US and "hard times".

Given the current state of inflation, the recession will not be just "less job growth", it will be NO JOB GROWTH and NEGATIVE JOB GROWTH to the extent of widespread loss of jobs. The current inflation is deep and widespread, and the figure of Fed rates does not tell the same story that similar rates used to tell. The depth of inflation plus the fact of how much money there is in the US economy plus the flow of outside money, not into Canada, [my wife recently inquired of me, "why is the USD going up, if there is going to be recession?"] are a sign of how deep recession will have to be in order to get this serious inflation under control. Things don't look good for Biden or for Canada (CAD down 4% monotonically vs USD since September 1).

Recession in US will bring joblessness. Canada's history of unemployment will be worse because of their dependence on the US economy.

Moshe: Most here don't "analyze" anything. They regurgitate Fox News. I don't know what you expect...

I am trying to think of a time where I have ever ever EVER lowered rents due to a recession. It might have taken three weeks to fill a place strictly due to the recession. I might have lowered rents due to winter weather, but never have I had to due to economics.

Then again, we typically don't push the national market place either. We tend to lag the market

Memory plays a part in your thinking, Ray.

We haven't had an inflation this bad since Jimmy Carter. The characteristics of inflation-dampening interest rates are different, now, with a great deal more money in the country.

I wish us all luck, but those who have hastened to take advantage of the rent surge, may need to contract.

A report today in Reuters today, says that the Fed will hike its interest rate index by "a much higher peak than predicted two weeks ago and the risks are skewed towards an even higher terminal rate". The prediction is, they (The Fed) will hike its fed funds rate by three-quarters of a percentage point for the fourth straight meeting in November. They further predict that would be followed by 50 basis points in December to end the year at 4.25%-4.50%.

Thats not really a high interest rate as Fed rates go in long term, but it is enormous following a near-zero rate. Its a huge blow to the economy.