Most people have noticed by now that rent prices are soaring across the country. It doesn’t matter where a home or apartment is located, nor how small it is – rents are higher than ever. It’s been speculated that the pandemic somehow started the trend of rising rent prices, but that isn’t the whole picture. Rent prices did rise significantly during the pandemic, but it was already in motion long before. And although the pandemic did contribute to some of the factors that caused skyrocketing rents, there’s more to the story.
Here’s a look at some of the reasons rent has skyrocketed so much in recent years.
First, let’s look at how the pandemic contributed to the problem. When the federal eviction moratorium was put in place, many renters stopped paying rent because they knew they couldn’t be evicted. When that ended, states enacted their own moratoriums, but there were exceptions, and not everyone was covered. Still, many landlords didn’t know they were exempt, and were too afraid to attempt to evict a non-paying tenant. Property owners weren’t generating the income necessary to pay their mortgages and other bills, and many went into foreclosure or sold their homes. Those who didn’t had to rent their properties at higher rates to make up for the money they lost during the pandemic, which was their only hope of recovering.
Homeowners are making improvements to their properties
Among the questionable reasons for rent increases are several legitimate reasons. For instance, many homeowners are making improvements in order to attract tenants and justify higher rent. These improvements can include basic renovations, like installing all new appliances, upgrading bathroom fixtures, and offering amenities, like an outdoor kitchen, a pool, air conditioning, or a jacuzzi tub.
While renovations and improvements are responsible for some rent increases, it’s not causing the massive hike. Most rising rent prices fall outside the scope of being attributable to only home renovations.
People no longer want to live with roommates
A large contributing factor to higher rents was actually self-inflicted by renters themselves. The demand for new homes has drastically increased since more people want to live alone rather than with roommates. For years, people commonly lived with 1-6 roommates (or more), and now many of those people are done. They want to live on their own.
This created a huge increase in demand for new developments for studios and one bedroom apartments. Unfortunately, these units actually cost more for landlords, and so they need to charge higher rents to make up for the cost.
Blackrock bought a lot of residential properties
When large corporations buy single family homes and rent them out for high prices, it’s renters who suffer the most. Blackrock, a large investment corporation, has been buying an enormous number of residential properties for the last several years, and they’ve been setting high rent prices. Between August 2019 and August 2023, the average national rent rose more than 25%.
Most people who can’t afford to buy a home can’t save enough for a down payment because they’re stuck paying high rent. Home prices have nearly doubled since 2002, but there aren’t many homes on the market. Blackrock, and other investors who have bought a large percentage of homes since the pandemic, don’t plan on selling the homes they’ve acquired. They seem to be controlling the market.
Inflation in general has been rising fast
Although inflation seems to have risen the highest during the pandemic, those high numbers have come down quite a bit, and in some cases, they have returned to pre-pandemic levels. Still, rent prices have not dropped to match. In fact, they’ve continued to rise. You would think that if rent prices were hiked due to higher material and service costs, once those costs dropped a bit, then we would see rent prices dropping, too. That isn’t what’s happening.
It could be that landlords can’t afford to drop the rent because they need the money to pay other expenses that keep climbing. It’s hard to say without conducting surveys. However, increases in inflation are significant, and that includes the price of rent.
Property taxes are rising fast
When property taxes rise, landlords typically pass the cost onto the renter, and increase rent. The problem is that property taxes have risen by 200% in the last five years in some areas. Many investors are now paying what amounts to $500 to $800 each month in property taxes.
High rents are a complexity
There’s no single answer for why rents are so high, and some people don’t see an end in sight. Will rents remain astronomical? Will they continue to rise? Many experts say it’s inevitable, so renters should be prepared for more rent raises.
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