The supply and demand constraints the construction industry felt through the pandemic are as visible as ever with housing shortage we currently face nationwide. Given that the production of new housing slowed tremendously with COVID 19, all existing product has come into higher demand over the last two years. Combine pure material and labor shortages with inflation and the cost of all goods increasing and you have a dangerous concoction that is resulting in unanimous rental increases across the country. At Kaufman Hagan, we’re taking this into serious account when advising clients on their underwriting for all Colorado submarkets. The days of conservative 3% rental increases are over until new inventory comes online to curb the lack of supply.
Apartment hunters face double-digit rent increases across the country
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In the hunt for an apartment, there are those who are getting squeezed out by rising rent.
“These are folks who have been working. They’ve been paying their rent. They’ve been doing fine and, all of a sudden, their rent increases significantly. They can no longer stay at their apartment,” said Christine Long, with Metropolitan Ministries in the Tampa Bay area of Florida.
Across the country, rent is up double-digits compared to this time last year. According to a study from Rent.com/RentPath, the average rent for a two-bedroom apartment is up 18.3%, and for a one-bedroom apartment is up 22.1%.
“We’ve actually seen rental prices increase significantly over the past two years,” said Jon Ziglar is CEO of RentPath, which conducted the study on rising rent. “We are right now in a stage where occupancy rates are at 97.5% nationwide, which, if you had said two years ago that number, they would have said that’s ludicrous: 94-95% is considered full occupancy in this country.”
So, where is the cost of rent rising the most?
For a one-bedroom apartment, places like Florida (+45%), Arizona (+53%), Nevada (+50%), Idaho (+60%) and Oregon (+41%) are seeing the sharpest increases.
The only state where rent for a one-bedroom apartment fell: Nebraska, where it is down about 1%.
Rent on two-bedroom apartments, though, didn’t fare better. Rent prices in Idaho for a two-bedroom are up a whopping 116% compared to last year. In Maine, it is up 135%.
“You have now a work from home economy, so people can live wherever they want,” Ziglar said. “And so, instead of living in New York City, they may choose to live in Denver or at a beach town or somewhere like that.”
So, what might 2022 bring for those looking for an apartment? Ziglar said rent might start to stabilize.
“Our recent study that RentPath put out shows that we expect about a 60% increase in people moving versus last year,” he said. “We do think people are going to start to be more mobile and that will create more turnover and more inventory.”
That turnover might also create a chance for some renters to find that elusive, affordable apartment.