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Across the U.S., the monthly rent for an apartment has increased an average of 7.5 percent this year, three times the typical annual bump, as demand is surging, Apartments.com reported.
Analysts expect rents to continue climbing into next year, due largely to three factors, according to the Washington Post:
- young adults are re-establishing their own homes after staying with friends or family during 2020’s crisis;
- people who enjoy city life are returning to urban centers, although many are relocating to lower-cost areas;
- older adults whose children have left home are cashing out of their owned houses and renting instead.
“We’re going to see [rent] increases for the next 12 to 18 months,” Robert Pinnegar, president of the National Apartment Association, told the WP.
“We’ve never had three generations in the rental housing space, at least not in the numbers we’re seeing now,” he said.
Demand for single-family rental homes is growing faster than at any time in the past 16 years, with rents for these units rising their fastest in 15 years, data firm Corelogic said.
Demand is also especially strong for apartments in smaller cities, which typically have a smaller inventory of flats, the WP noted.
Rents for houses and apartments combined are rising at the quickest pace since 2006’s housing crisis, Zillow.com said.
The rising rents are an additional factor that could fuel long-term inflation.
Rental homes in the U.S. have been in short supply for years, especially less-expensive units, particularly in urban and exurban areas.
The shortage was worsened as building projects stalled during 2020 and some rental units were sold as owners cashed out during the ongoing boom in home sales.
Freed by last year’s lockdown to seek more space and lower costs, renters have flocked to the Sunbelt and inland western states, causing a shortage of rental housing in those areas that likely will take years to resolve, according to the WP.
Rents are even rising again in New York City and San Francisco, although rates are still below their pre-shutdown levels.
In November, 60 percent of listings on Apartments.com advertised one or more months of free rent; now 35 percent do, the service said.
TRENDPOST: As we report again this week (“Blackstone Pays $5.1 Billion to Buy Rent-Controlled Apartments”), the rental boom has lured private equity firms into the field. The firms are buying dozens or hundreds of houses and apartment buildings at a time, hoping to profit from what they believe is a long-term rise in rents that will remain high once demand stabilizes. (See “Real Estate Investors Choosing Single-Family Rental Homes,” Trends Journal, 13 October 2020.)
TREND FORECAST: Private equity firms’ ability to pay top prices in cash for houses is creating an upward spiral that will keep single-family rentals in short supply and high in price for the foreseeable future.