Rental rates across the nation are rapidly surging, marking their highest monthly rise since June 2007, and offering one benchmark — along with rising gas prices — for inflation concerns.
According to federal consumer price index reports released Thursday, rents jumped 3.8 percent from May 2015 to May 2016, the Labor Department's Bureau of Labor Statistics said, marking a pace of 0.4 percent monthly. The rental rate hike outpaced wages, which rose just 1.4 percent over the same time period, the latest economic data showed. Overall, consumer prices were up 2.2 percent in the past year, the index found.
Rental markets are tight across many cities as a shortage in the housing market helps fuel desire for more people to rent rather than attempt to buy.
"Rental and home prices have been pretty steadily rising," observes Debbie Steubs, a Realtor at Keller Williams in St. Petersburg, Florida. "Currently, St Petersburg is experiencing a period of low inventory. Many homes are sold before they even hit the market and, if priced properly, at full asking price. Even the rental properties have monthly rent priced as high as a mortgage payment. This has renters looking at buying as well. It's an extremely competitive market right now."
In areas in and around San Francisco, soaring rents have sent consumers seeking rent control protection. Their concerns reflect fears that middle-class workers are being driven out and have led to the growth of tenants’ rights groups which are collecting ballot initiative signatures and are turning to government for relief as earnings cannot keep pace with housing market prices.
One new San Francisco resident, Kendal Rossman, moved to California two months ago from Michigan and registered sticker shock as she transitioned from affordable rent of $750 for a two-bedroom suburban apartment, to frightful limitations as she embraced one of the nation's highest rental markets.
"I wanted to live in the city and I was thrilled to get one room in a four-bedroom house for $1,000 monthly," she said, noting that even at that rate, she shares a bathroom with one of the home's other two tenants.
While completing college, Rossman spent two summers working as an intern in New York City. But, she says, San Francisco seems far worse in terms of its rental market, making the prospect of finding a future place on her own daunting.
While some development groups are fighting rent control initiatives, others in the apartment rental industry have gone to Congress to complain that cities and municipalities have made it tough for them to build and meet growing demand amid questions of growing affordability.
"First, while the cost to develop and operate rental housing increases every year, the median renter household income today is virtually unchanged since 1981, on an inflation-adjusted basis,” said Clyde Holland, chairman and CEO of Holland Partner Group, who testified in March before Congress on behalf of the National Multifamily Housing Council and the National Apartment Association.
“Almost 75 million young adults are entering the housing market, primarily as renters,” Holland told the House Committee on Financial Services Housing and Insurance Subcommittee.
“At the same time, Baby Boomers and empty nesters are trading single-family houses for rental apartments. This combination of factors is forecast to lead to four million new renter households over the next decade.”
A study of Craig's List rentals released this week by the National Low-Income Housing Coalition (NLIHC) found that median rental rates nationwide were $1,145. East coast renters who lived in the Washington, D.C. to Boston corridor as well as the coastal communities of California paid the most per square foot for residential rental space as well as those on the coast of South Florida and in Seattle, Denver and Chicago.
The highest rents overall were in New York, San Francisco, Boston and Santa Barbara, California, according to the study, completed by University of California Berkley researchers Geoff Boeing and Paul Waddell.
The NLIHC noted that while rent is considered "affordable" when it is less than 30 percent of household income, "most rents surpass that." The group added on its website that the average hourly wage for a U.S. renter was $15.42, but today, "U.S. renters need to earn an average of $20.30 per hour to afford a modest two-bedroom apartment."