Across the United States, rental rates continue to rise as we move out of winter and into upcoming warmer months. In already expensive New York, as the pain of the pandemic abates, rent has risen 30% year-over-year, while growing tech hub Austin has seen rent prices rise 40% since last year.
Jessica Torres, who rents a house in Tampa, Florida, was hit with a rent increase of 15% from a move in date of just last year. “I am now having to evaluate whether to just accept the amount, since it doesn’t seem to be much less expensive anywhere else.”
There is now a growing movement to regulate rent hikes across the country. Laws vary from state to state and city to city on providing notice to tenants about these increases. For example, Seattle requires a 180-day notice for a rent increase. According to CNBC “In Oregon, most hikes are already limited to 7%, plus inflation. Recently, Santa Ana, California, passed legislation capping rent increases in most buildings to no more than 3% during any 12-month period. And residents in St. Paul, Minnesota, voted last year in favor of a rent control policy that will also limit increases to 3% a year beginning May 1.”
Regulation has not caught on everywhere, however. Even places like Florida, that held off on rent hikes during COVID, ended those moratoriums at the end of 2021. At the start of COVID, many landlords offered reduced rents along with other considerations like temporary forgiveness to tenants who were strapped for cash under the circumstances. But as the pendulum swings back the other direction and pent-up demand has crept into most corners of the US economy, tenants are now facing lease renewals with much larger than standard increases.
CNBC encourages those facing this challenge to do research via web sites that can help compare rent increases among different apartments in their neighborhood as well as the diverse markets across cities. “Openigloo.com has a rent calculator that can help New Yorkers learn if they’d be overpaying. At Zumper.com, tenants can look up the median rental prices in many cities.”
A longstanding rule of thumb about housing from financial advisors is to spend no more than 30% of one’s salary on rent or a mortgage. As rents continue to climb across the US, affordability has become a palpable issue in this hot housing market—so in reality, renters simply may not have that choice. In this environment, people may be better served vying for wage or cost of living increases from their employers, or risk being priced out of their homes.
What else is a tenant to do? Many property management companies and landlords price lease renewals at a lower cost than they do new leases. In those cases, it’s usually more advantageous for someone to stay where they are. Jessica Torres looked across similar rentals in Tampa that fit her needs and found that the prices were far higher than her rent, even with the increase. Coupled with the cost and hassle of hiring movers and setting up new utilities, among other time killing to-do’s associated with moving, it makes more sense for her family to stay where they are – for now. If prices continue to increase, she says “I will have to look at downsizing until I can buy. The choices are limited if I don’t want to spend over a certain amount”.
CNBC shared “If a steep increase puts you far above that threshold, I’d suggest finding something else…even if you could tolerate the increase by cutting back in other areas, this may be unsustainable if the rent goes up again the following year.”
“Rents are up 30% and more in some cities. What to do if you’re worried about a big hike” by Annie Nova, CNBC, 2.11.22.
Chris oversees business development, investor relations, and capital partnerships. With 25 years of experience in alternative investments, Chris has raised $250 million in assets. He’s served as Chief Compliance Officer, co-managed a Fund of Funds, and worked in operations and trading. Chris has been instrumental in growing four companies. Through firms like Sapourn Financial Services, Dekker Capital Management, and Diamond Peak Capital, he’s delivered solid absolute returns across varied market cycles.