- Finding a place to live is becoming increasingly challenging for renters.
- There are more renters than pre-pandemic, demand is high, and prices are soaring.
- It’s driven by a still-hot housing market, migration, and several generations of renters competing.
Not only is buying a home out of reach for many Americans, but renting one might soon be, too.
Finding an affordable place to live in 2022 is a daunting task: Rentals are few and far between, demand is surging, and prices are sky-high. To make matters worse, prospective homebuyers unable to score a home and those moving out of pandemic-era living situations are flooding the rental market, snapping up reasonably priced apartments.
All told, it’s creating a nightmare situation for renters that’s impacting everything from affordable housing to higher-end rentals.
It’s an issue with no single cause, but one reason might be that there are simply more people in search of a place to rent. There were 44 million renter households in the US by the third quarter of 2021, an increase of roughly 870,000 households compared to the first quarter of 2020, according to a new report from the Joint Center for Housing Studies at Harvard University.
In turn, that surge in renters led to a sharp drop in the rental vacancy rate: At 5.8%, that rate is now the lowest it’s been since the 1980s, the report shows.
But rent prices — which initially dipped in the early months of the pandemic — have been climbing throughout the past year. Zumper data from September showed that the median price for a one-bedroom apartment had risen 10.7% nationwide since March 2020.
Realtor.com data from December showed an even starker picture: Rents jumped 19.3% year-over-year in the nation’s 50 biggest markets.
“People who are experiencing the downside of this strong market are essentially renters across the board. We’re seeing rent increases that are really just striking,” Chris Herbert, managing director at the Joint Center, said Friday in a presentation of the report.
Those in search of “higher-quality” apartments are likely having a tough time finding something — vacancy rates are low, and rents for professionally managed units spiked 13.8% in the third quarter of 2021.
But the situation is disproportionately affecting low-income renters and people of color. Over 60% of renters are considered low-income, and that category of renters is more likely to have endured income losses during the pandemic. Half of Black renters, 34% of Hispanic renters, and 28% of Asian renters make less than $30,000 a year
At the same time, rent is rising and there are fewer units available — the report estimates that there’s currently a shortage of 1.5 million units for lower-income renters.
A striking example of that shortfall is the recently opened building in Brownsville, Brooklyn, that offers affordable- and supportive-housing. The building, home to 37 apartments ranging from studios to three-bedroom units, received 47,000 applications.
Migration, competition, and a hot housing market
The reasons behind the rental crisis are complex, as Insider’s Taylor Borden reported.
Migration has played a role. Renters who fled cities during the pandemic and moved to new, cheaper locales like Phoenix are driving up rents, and those returning to major cities are fighting over rentals.
Plus, multiple generations are competing for available units. First-time renters like Gen Z, or those who lived with their parents or other family members during the pandemic, have been steadily moving out. Baby boomers are selling off their homes in the lucrative market and renting instead. And millennials, the largest generation, are just simply more likely to be renters right now by nature of them being mostly in their 20s and 30s, according to the Harvard report.
In addition to those factors, homebuyers who have been shut of the real estate market over the last year turned their attention back to renting since people “still have to live somewhere,” Logan Mohtashami, HousingWire’s lead analyst, told Insider last year.
The frenzied competition that became commonplace in the housing market had already spread to the rental market by this past summer, Corcoran Group CEO Gary Malin told Bloomberg at the time.
“You’re seeing people sometimes getting in bidding wars, you’re seeing people have rents changed on them right away, you’re seeing apartments rented before they even show up at the appointment,” he said.
And just in case some renters are reconsidering buying now that 2021 has come to a close, it still may not pan out: While prices could grow more moderately this year, mortgage rates are expected to keep rising throughout the year.