rent in America is getting more
expensive no matter where you live. rent growth is accelerated
coast to coast in big cities, Rural areas. East West, South
North is across the entire economy. The areas where we are seeing the
strongest rent growth are in places like Austin, Texas. Yeah, so my name is Maria and I
live in Austin, Texas. During the pandemic, a lot of people
began to leave. And actually, the rent dropped that year. By
$100. I am due to renew my rent, and there was a spike of $400. Making matters worse, few of the
new homes and construction are affordable, rental demand continues to be
extremely strong. And the rental units that are being built are
the more expensive ones, that is the higher end ones. Meanwhile, workers' pay isn't
increasing enough to match the new rent. We had wage supression for 40
years. And then we have the period now where wages are
growing, especially at the low end. And so the question is, how
long will that continue? Experts say the rent increases
will have an impact on the economy. A lot of the monthly expense for
the typical household is money that's going toward the rent, or
to upkeep of the house. So it is a very important part of all of
consumer expenditures. In the most competitive markets.
Rents are creeping toward record highs, renters in smaller
markets are feeling the squeeze too. For example, one-bedroom
rentals in Gilbert, Arizona spiked over 116% In the past
year. Meanwhile, rent for a single-family home is growing at
its fastest pace since 2005. According to CoreLogic. So how
did we get here? One answer is the bounce back from the
pandemic. You saw tech companies, major
firms moving to smaller cities, cities like Pittsburgh, Austin,
San Antonio, Charlotte, these are cities that really started
booming because workers had more flexibility. And when the city
starts booming, of course, the rents go up because it's a
supply and demand issue. But the story goes back further
than that, all the way back to the Great Recession. President Obama you listening?
This has been building really since the end of the financial
crisis back a little over a decade ago, a lot of communities
have made it more difficult to build more homes closer to the
urban cores, building materials, particularly lumber has been in
short supply. That's been a problem of labor. You know, a
lot of people left the construction trades in the
housing bust back a decade ago. And because of changes in
foreign immigration laws, we have a lot fewer foreign
immigrants coming into the country, many of those folks
would work in the construction trades. Also a lot of smaller
builders, they rely on loans from banks. And since the
financial crisis, banks, particularly smaller banks,
midsize banks, have been unable to because of regulatory changes
and other reasons unable to to provide enough loans. So you
know, there's a melange of things going on here. After the financial crash of
2008. house building stalled by the end of the 10s. Renters had
fewer options, especially in real estate hotspots pre-Covid, we saw a huge rush to
urban centers, millennials love to live in cities longer, they
were actually living there longer than the previous
generations their age had because they weren't able to get
out and afford to buy homes because home prices were so
high. So you had so much demand in the cities, then the pandemic hit. So if you look at some of the
high rise apartment buildings in the really dense central
business districts of the big cities spreads were actually
declining in the first 12 months of the pandemic. But smaller cities like Phoenix and
Austin received more of those remote workers. That's an prices
upward for people like Maria right now, I would say for a
studio is probably $2,000. This place it's a one bedroom was
originally set at 1700. When I first moved in, Maria is a teacher and needs to
commute to work every day, she and many other Americans don't
have the luxury to move further away from work to save cash
that's creating wider issues in the economy. There's a lot of evidence that
the lack of housing closer to where the demand is and urban
cores is having a meaningful negative consequence on long
term economic growth so we can figure out a way to change
zoning rules and laws and get the lumber and land and labor
that we need are able to build closer where the jobs are, you
know, our economy will be able to grow more quickly more
strongly in the longer run. renters in the traditionally
cheaper suburbs are feeling the burden too. economists say that
finding any home to rent right now is uniquely difficult. Because the vacancy rates are
really so low. It's the lowest we've seen in the generation. Coming out of the pandemic, it's
likely for rents to keep rising. Fortunately, builders are
ramping up their building, they can make a lot of money, you
know, with rents this high and house prices this high. So they
have a lot of incentive to put up more homes. And that's
happening slowly but surely we are seeing more homes put up. So
that's a good sign. And we've seen an increase in
single family housing starts. That's really important, because
that's the preferred housing structure during the pandemic,
so having investors come in buying homes might maybe puts a
little upward pressure on home prices. Sure, maybe it does. But
it does increase the stock of single family rental homes
available in the market, and should help to moderate rent
growth. And in the cities, some realtors
are weighing whether to convert their less busy office districts
into residential neighborhoods. The idea is to say that there
are some empty buildings, you know, brick and mortars already
established, but maybe one can repurpose it into residential
units. For the short term, renters are
dealing with the market. If I had signed the lease I
would have it would be taking a lot of my savings and so I
decided to move to a new building. I'm losing about 150
square feet. These hikes are hitting us
citizens at an inopportune time. over decades, wages for most
workers have stagnated. The wages and benefits of a
typical worker were suppressed in the period. For decades after
1979 growth was very slow. There was growing inequality that
worked against the middle; in effect against anybody in the
bottom 90%. In 2019, Oregon became the first
state to impose statewide rent control. They cap increases at
about 7%. cities like New York, San Francisco and Washington DC.
Also limit rent increases, these policies have some benefits. One
study found that renters were about 20% more likely to stay in
their homes with rent control. Other economists think that rent
control does more harm than good. So what history has shown is
that by putting a rent control, yes, its benefit temporarily for
people to pay lower rent, but that deters incentive to build
more homes or provide money for maintenance. So all the housing
stock steadily deteriorates over time, and one does not want to
see that. So we want to encourage more production, the answer to rising rents may be in
the job market. both Congress and the Fed have pumped stimulus
into the economy, it should eventually help some workers
earn higher wages, there's been a huge increase in
the demand for goods and services. So we're gonna see a
period of sustained low unemployment. This has always
led to faster wage growth for those in the middle and the
bottom. The other related question is, will we see the
structural changes, then I'll build us into the economy rather
than be an episode of a period of low unemployment. And I think
that will require improving labor standards. So you know,
putting in the $15 minimum wage and rebuilding collective
bargaining, I think that will mean paying attention to
maintaining low unemployment, which means that
the answer to rising rents might be getting yourself a raise, or
finding roommates. They're not building enough
affordable housing right now because for builders, the cost
of construction is so high, due to a high cost for land labor
materials shortages, for materials, shortages of labor,
that they can't build affordable housing. You know, it took us 10 years to
get into this predicament. It's not going to be solved next year
or the year after it's, it's gonna be 10 years before we
solve this problem.
