This is an excerpt from CNBC Make It’s weekly newsletter. Subscribe here.
Sorry to be the bearer of bad news. But if you’re currently renting your place, you might see the price tick up when it’s time to renew your lease.
In fact, rent is forecast to be even higher this year than it would have been if the pandemic had not occurred.
Throughout 2020, many renters were able to benefit from price reductions or even months of free rent as landlords struggled to fill empty units. But those concessions are more or less gone, and landlords are hiking up prices as Covid-19 restrictions end and housing demand spikes.
Housing costs were rising before Covid, but the coronavirus exacerbated the problem: The national median rent has increased by 11.4% so far in 2021, compared with just 3.3% for the first six months of 2017, 2018 and 2019, according to a report from Apartment List, a rental listing site. Average rent growth this year is outpacing pre-pandemic levels in 98 of the nation’s 100 largest cities.
Rent is surging for a number of reasons, including more certainty in the job market and young people moving out on their own as pandemic restrictions end, says Nicole Bachaud, a market analyst at Zillow. Many people left cities and others moved in with family members in 2020, but that’s reversing now.
“People have a lot more confidence now,” Bachaud says. “That’s putting a lot of demand on things all at once.”
It’s not just big cities that are experiencing booming housing costs. In a reverse from past years, prices in midsize markets like Boise, Idaho, are growing faster than in larger areas like San Francisco, according to Apartment List’s research.
These rising prices will likely leave millions of Americans newly housing cost burdened, meaning they will be spending more than 30% of their monthly income on rent, Bachaud’s own research at Zillow finds.
Bachaud also predicts that some of the most affordable places in the country — specifically in the Southwest and Sunbelt, including Austin, Texas, Las Vegas and Phoenix — will be some of the least affordable by the end of the year, given demand. What’s more, “we don’t really see rents dropping again in the near future,” she says.
Wages are not keeping pace with the rising costs, compounding the financial strain, she says. And though rents in many places dropped in 2020, tenants were also more likely than homeowners to lose their jobs or have their hours cut throughout the year. Many cannot easily pay more for rent now.
There are no easy individual solutions to combating rising housing costs, Bachaud says. But one thing tenants can do is learn about their rights. Some local governments legislate how much notice a landlord must give renters of a rate increase, for example. Knowing about a potential price hike could help tenants negotiate a better deal or find more affordable housing.
Additionally, remote workers or those who can find a new job may also be able to relocate to a place where housing costs aren’t rising as much, though that is not an ideal fix and won’t work for everyone.
It’s also important to disburse the tens of billions of dollars in Covid-related housing relief that still needs to make its way to tenants and landlords, Bachaud says. Tenants behind on their rent can find information on their local rental relief program here. That won’t necessarily lower future costs, but it will alleviate some of the current financial strain.
Sign up now: Get smarter about your money and career with our weekly newsletter