Why Are Rental Prices Still So High?
Many of us have been keeping an eye on rental prices in our area and expecting them to become more affordable. But that just hasn’t panned out – quite the opposite, actually. In the 50 largest U.S. metro areas, median rent rose an astounding 19.3% from December 2020 to December 2021, according to a Realtor.com analysis.
How is it possible that during a ‘once-in-a-lifetime’ pandemic and accompanying economic downturn, rental prices are still high? A variety of factors have set the stage for the financial challenges American renters are facing in the housing market, here is a look at a few of them:
Demand is Still High, And Vacancy is Low
The law of supply and demand dictates that when demand outpaces supply, prices are driven up. While we might have just experienced a pandemic, it has only increased the need for housing, and in fact, we have just set a new record of 97.5% in November, (according to RealPage, a real estate technology platform). That rate is up quite a bit from the ‘long-term norm’ of about 95%
Building Of New Units Has Been Reduced by the Pandemic and also Inflation
When everyone stayed at home for much of 2020 due to the the COVID-19 pandemic, many housing developments were halted and postponed. Many of these proposed and permitted projects still have yet to be resumed.
Compounding that fact, inflation is making it more expensive to build. Inflation jumped 7.5% in January (from a year earlier), the biggest increase in four decades. While many economists expect that to decrease, rising rents could keep inflation high through the end of the year since housing costs make up one-third of the consumer price index
The Need for Affordable Housing Persists
In the meantime, people are struggling to stay housed. “There is no county in the U.S. where you can work a minimum wage job and afford a two-bedroom apartment,” says Rob Dicke, executive director of the Dane County Housing Authority.
Homelessness is on the Rise
The nation’s homeless population grew in 2020 for the fourth year in a row. On a single night in January 2020, there were more than 580,000 individuals who were homeless in the United States, a 2% increase from the year before. This, according to numbers released by The Department of Urban Housing (HUD).
Also, more than 106,000 children were homeless during the once-a-year count, conducted in most communities across the nation. While the majority of homeless children were in shelters or transitional housing, almost 11,000 were living outside.
“And we know the pandemic has only made the homelessness crisis worse,” HUD Secretary Marcia Fudge said in a video message accompanying the report. She called the numbers “devastating” and said the nation has a “moral responsibility to end homelessness.”
Some Positive Signs
As we wrote about last year, The American Jobs Plan included $318 Billion for the construction of up to 2 million affordable housing units. The majority of the funds ($213 billion) will be spent on a variety of programs at the U.S. Department of Housing and Urban Development. This includes $45 billion toward the National Housing Trust Fund, which helps households whose income is below 30% of the median income.
The other large chunk ($105 billion) of the funding will be tax credits to incentivize property developers to create affordable housing.
Founded in 1991 by Tom Willard and his wife Deborrah, The Foundation for Affordable Housing has created safe, comfortable, high-quality, affordable homes that enrich the lives of their residents and add stability to the surrounding community. The residences that are maintained by FFAH house over 60,000 people.