Tenants Are Struggling To Find Rentals As Rents Continue To Rise

Now in August 2022, seemingly post-pandemic, we’re seeing rent prices move upward. According to Apartmentlist.com, during the first seven months of 2022, rents have increased 6.7% vs 12% for the same period in 2021. Rent.com reports that 92% of US one bedroom rental markets are showing rising prices and only 7% have fallen. The demand for rental apartments is so strong, bidding wars are now common

Screenshot courtesy of Statista.

The growth rate of apartment prices in the US may have tailed off substantially, however many cities are seeing strong growth in prices.

High rent prices in themselves sets forth a process where renter churn happens. When it does, landlords are free to reset prices to levels they need to keep their businesses profitable. Increasingly, inflation at 9.1% means landlords too are under pressure and many haven’t recovered from the pandemic.

When renters are priced out of their current rental, they must look to more affordable apartments, move to another region or city, or move back in with parents.

When renters face big rent increases, like they are right now in New York and San Francisco, churn is going to happen. 

Will Rent Prices Keep Rising?

As the charts revealed, the home buying market is being decimated, resulting in more commitment to the rental market by renters. It’s difficult to forecast home prices throughout the next 5 years, yet with home construction down, inflation high, and Americans savings accounts strong, with good employment outlooks, there might be good pressure for rent price rises.

The rental property market looks promising resulting in continuous demand for property management software, property management services, and rental units themselves.

Of recent, the number of renters making rent payments on time has decreased slightly, but overall renters appear to be taking their rent payment responsibilities seriously.

The key drivers of high rent prices are:

  1. high real estate prices
  2. intense demand for rentals
  3. employment picture better in some cities
  4. low vacancy rates (few are moving, low churn)
  5. constrained housing supply
  6. migration out of big cities and out of pandemic destinations
  7. high employment (only in some cities)
  8. reduced new apartment or house construction
  9. local building regulations reduce new rental unit development
  10. NIMBY action at local level prevent development of multifamily buildings
  11. high construction costs for multifamily developments and apartment buildings
  12. investor expectations of returns
  13. younger renter demographics (Millennials who can’t afford to buy will rent instead, and fast rising numbers of Gen Z’s)

Additionally, the residential housing market has moved to single family home ownership rather than multifamily rental construction according to the latest report from multifamily executive.

Apartment construction was brisk back in 2017. However, since then construction rates have plummeted despite low financing rates, improving economy, and rising demand. 

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