Did you know that rental inflation is the highest it’s been in forty years?
Ever since the real estate crisis of 2008- fourteen years ago- the housing market was unable to ever fully recover. This means that there are people looking to rent who were children when this crisis began.
Rental inflation is a complex topic, and it can be hard to understand the full effects of it on both people and the economy.
Luckily, that’s where we come in. If you’re looking for a deep dive on the cause and effects of rental inflation, you’ve come to the right place. Simply keep reading to learn everything you need to know.
What Is Rental Inflation?
Rental inflation is, simply put, when the rent increases sharply. It has become a problem in the United States, particularly since the pandemic hit.
According to Census Bureau Data, some tenants are now spending over half of their income on rent alone. This is particularly concerning, as people commonly desire their tenants to be making three times the amount of their rent.
This is leading to a rash of people unable to pay their rent or other crucial expenses needed to survive.
Inflation has been seen in other areas of life, but none as high as rental inflation- which is up fifteen point two percent from last year. Singular homes are seeing rent hikes as high as thirty percent, which is completely unsustainable for many people.
Although the rental inflation rate shows signs of beginning to slow, it is still something that we have to live with for the time being.
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What Caused the Rental Inflation Crisis?
There are many differing factors at play that caused the rental inflation crisis to become quite as much of a disaster as it has been.
One of the biggest factors is the ramifications of the recession of 2008 and 2009. During those years, home construction ground to a halt. The real estate market suffered a crash.
Even when the economy slowly began to recover from this, the housing industry never managed to. It lead to an imbalance- high demand and little supply. Even now, America is short approximately four hundred million homes.
Until there is a higher supply, rent is likely to remain very competitive.
Another large factor in the rental inflation crisis is, perhaps unsurprisingly, the pandemic. The government imposed tenant eviction moratorium was meant to keep people from losing their homes in the height of the pandemic, but it put pressure on both tenants and landlords.
Tenants had to pay rent and late fees in cases of missed payments, and landlords faced a struggle due to the fact that mortgages were not halted. As soon as the moratorium ended, landlords were forced to raise the rent in order to simply survive.
With the pandemic slowly coming to an end, people are seeking to return to the cities they moved out of to keep themselves safe. This means that the demand for housing only continues to spike.
While the past few months have seen an increase in construction permits for the purpose of home building, that’s not actual construction. In fact, construction on homes is actually beginning to slow again.
This is due to three things in particular- the rising interest rates in buying materials, the rising costs in purchasing materials, and the issues in the supply chain that was caused by the COVID-19 pandemic.
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What Does Rental Inflation Mean for Tenants?
In the aftermath of the rental inflation crisis, many tenants are left struggling. Some tenants may need to restructure their budget, spending less on groceries and other necessities in order to be able to live. Other tenants may need to dip into what meager savings they have.
Still others may be unable to afford to pay the rent. If you fall into this category, the number one thing that you must do is communicate with your landlord.
Odds are that your landlord will understand if the rent will be a few days late, but if you don’t communicate then you won’t give them the chance to understand.
You could ask for a rental extension, or ask if you can pay some of the rent now and the rest later. If you are looking at a long term restructure of finances, you can ask the landlord to renegotiate the lease to change when your rent is due.
All in all, it may be a stressful road, but you don’t have to fear anything. Just take a look at your finances and work out a game plan accordingly.
What Does Rental Inflation Mean for the Economy?
Unfortunately, the effects of rental inflation on the economy aren’t going away anytime soon. With so many people unable to afford rent, there’s likely to be a spike in homelessness. And whether someone has a home or not greatly affects their employment.
Beyond this, inflation in one area affects inflation in other areas. Food and gasoline prices are likely to be affected due to people being less able to afford either of them and yet in more need of them to survive.
The lack of ability to pay rent due to the rate of rental inflation will no doubt lead to a push for an increase in the minimum wage. Even though this is something that needs to happen in order for people to be able to live, it will in turn affect the inflation rate of housing.
When the minimum wage increases, landlords will no doubt assume that means that their tenants can afford to pay more and increase the rent. It’s a nasty cycle to be trapped in.
Rental inflation is a problem that was years in the making. As such, the solution is also likely to be years in the making. In the meantime, the economy has to do a delicate balancing act.
Failure to balance all of these factors would mean a disaster in the making. After all, if things spiral until no one can afford them, it is likely to cause another recession like the one experienced from 2008 to 2009.
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What Can I Do About Rental Inflation?
Unfortunately, rental inflation is a long term problem, which means that any short term solutions won’t work. All that you can do is try and mitigate the damage.
If you are facing a sudden increase in your rent, there are several things that you can try. First of all, look into local laws and regulations. Thirty-six states have laws on rent control put in place.
If that fails, you can check and see if you qualify for rental assistance. Many ways to apply for it involve easy use of a website. Depending on where you live, you can also find a fair housing organization that will help you navigate the situation.
Another potential idea you can execute is attempting to negotiate with your landlord. Keep in mind that you shouldn’t overpromise anything and that you should never agree to pay rent you know you can’t afford. With this in mind, negotiating with a landlord works best if they want you to stay.
Make sure to be respectful, professional, and punctual in how you communicate with your landlord or property manager. This goes a long way in making yourself seem like a good tenant who will be responsible with the property leased to you.
If all else fails, then you are left with the final option of moving. However, the cost of moving to a new rental is often more expensive in the long run than just taking the rent increase.
If you have no choice but to move, then look to work with a property management service. They can help you find the best rental homes for you. In addition, these rental homes are often in excellent condition and all communications are prompt, which can be more difficult to arrange when working with someone who isn’t affiliated with property management.
Contact Us Today!
Now that you’ve learned everything there is to know about rental inflation, it’s time to take the next step.
As a property management company, we work with homeowners to deliver consistent and long-term results by pricing homes realistically and affordably. Each property is treated as one of our own, so you can expect only the best of care.
Tenants can expect help finding a home that suits them, with easy ways to reach out if maintenance is needed.
To learn more, you can contact us here.