Rent prices have drastically skyrocketed across the country over the last few years. Are you still paying rent to live in your home? If you are, it is likely that are you seeing anywhere from 10% to 40% more on your monthly rent payments. Why is this happening?
Below are the top eight reasons why rent prices are skyrocketing.
1) COVID-19 Restrictions
The rise in rent prices started with the COVID-19 pandemic. After government restrictions got put in place, many people were laid off or forced to stay home until the pandemic was over.
Since they weren’t making much money, many tenants couldn’t afford to pay their rent.
The U.S. Centers for Disease Control and Prevention forbid landlords from evicting non-paying tenants from September 4th, 2020, to June 30th, 2021.
Although it didn’t release the tenants’ obligation to pay the rent, they weren’t allowed to get evicted while the government restrictions were in place.
As a result, many landlords went a year and a half without receiving rent payments from their tenants.
Once the government order was lifted, landlords started raising their rent prices and evicting non-paying tenants to compensate for lost time and higher expenses.
2) Inflation
Inflation is something we’ve all heard about in the news in recent years. The cost of goods and services rose when the supply chain slowed down due to the COVID-19 lockdowns.
It also didn’t help inflation when the government printed trillions of dollars in stimulus money within a year.
Now it seems like everything costs more money, including utilities, food, water, and construction.
Landlords must bear the high cost of these expenses, so they are forced to raise rent prices to compensate for them.
3) Less Home Buying
Fewer people have purchased homes over the last two years because of job insecurity and challenging economic times.
Because of this, the rental market is hotter than ever since more people want to rent than to buy.
If you remember your high school economics class lessons about supply and demand, low supply and high demand mean the cost increases for the product or service.
Therefore, the high demand for properties to rent has caused the rental prices to rise.
4) More Young Adults Moving Out
Many young adults had to move back in with their parents during the COVID-19 lockdowns.
However, now that the restrictions are lifted, more young adults are eager to move out on their own again. It is another reason why the demand for rentals is high.
Young adults don’t even want to have roommates either. They spent so much time at home during the lockdowns that they desperately crave their own space and independence.
5) Price Gouging
Some dishonest landlords artificially inflate their rental prices and then blame it on inflation to justify the price hikes. Since the supply of rentals is low, it is difficult for renters to find fair-priced homes for rent.
The good news is that some states have laws against price gouging rentals over a particular percentage. But in most states, landlords have ultimate power over the rental prices.
6) Interest Rate Hikes
The Federal Reserve has increased interest rates on mortgages over the last few years as the demand for credit has risen.
Anytime interest rates rise, fewer people purchase homes because they’d be paying more in interest on their mortgages. So, they choose to rent instead.
More renters mean more demand for rentals and a reduced supply.
7) Less Construction
Construction on new houses and apartment buildings has halted over the last few years.
The lack of construction has continued to keep the rental supply low and the demand high.
8) Increased Migration
The COVID-19 pandemic has caused more people to move out of big cities and find cheaper housing in towns and rural communities.
Unfortunately, the rising demand for rentals in these communities is causing the rent prices to rise in them as well.
Conclusion
The only way rental prices will decrease is if inflation is reduced and the supply of rental properties outweighs the demand. It will eventually happen, but there is no telling how long it will take.
