After going down during the early days of the pandemic, rents are rising again. Almost 60% of renters report that their rent has gone up during the last 12 months. One in three say the increase was by 10% or more.
A new survey, released by Freddie Mac, also found that only 38% of renters saw their wages increase during that time. A third of survey participants said their increase in pay won’t cover their increased rent.
In more bad news for both tenants and landlords, nearly 20% of people who experienced a rent increase say they are now “extremely likely” to miss a payment.
“The surge in rents that took place over the last 12 months has created even greater housing uncertainty for the most vulnerable renters,” said Kevin Palmer, head of Freddie Mac Multifamily. “Our survey shows that the national housing affordability crisis is worsening and that inflation is a key driver.”
The cost of housing has steadily risen since the beginning of 2022. In its July Consumer Price Index (CPI), the Labor Department reported that the cost of shelter rose 0.6% from June to July and is up 5.7% year-over-year.
The growth in rents is slowing
Other sources suggest that rents are growing even faster, especially for single-family homes. CoreLogic puts the year-over-year single-family home rent at 13.2%, rising nearly as fast as purchase prices. But its report contains some good news for renters.
“While the annual growth in single-family rents is nearly double that of a year ago and is still near a record level, price growth began decelerating in June,” said Molly Boesel, principal economist at CoreLogic. “Nationwide, both year-over-year and month-over-month growth were slower in June than they were earlier this year, and roughly half of the largest U.S. metro areas experienced a slowdown in annual growth in June.”
The Freddie Mac survey tried to gauge the impact of rising prices on consumers' housing choices, and it included a set of questions that were specific to renters. The nationwide online survey was conducted this year from June 6 to June 10 among a representative sample of 2,000 American consumers aged 18 and older.
Not surprisingly, nearly every household in the survey was impacted by inflation during the last 12 months, which made rent increases even more painful. Sixty-six percent of consumers in the survey singled out higher costs for groceries and household supplies as adding to their financial burdens. Among the other most cited cost increases were those for transportation, eating out, and utilities.
Renters make up most of the pool of potential homebuyers, and the survey suggests that this pool of people is quickly drying up. Nearly three-quarters of survey participants report that they have put off homebuying plans. About half said home prices have increased to the point that a suitable home is no longer affordable.