Why Rent Is Rising In The U.S. - YouTube

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.