Aug 16, 2022 - Economy

Why rents are soaring pretty much everywhere in the U.S.

U.S. median asking rental price
Data: Census Bureau; Chart: Jacque Schrag/Axios

Until recently, soaring rent prices were mainly a Big City problem. Now, rents are an everywhere problem.

Why it matters: Skyrocketing rents, coming at the same time housing prices are at historic highs, make it hard for people to afford to live. At the lower end of the income spectrum, higher rents put more people at risk for homelessness.

By the numbers: Asking rents in the second quarter were 23% higher nationwide compared to the same period in 2019, according to Census data released earlier this month.

  • These are the rents landlords charge to new tenants, as opposed to renewal rents — the price you pay when you renegotiate your lease. Those going up, as well, but not as much.

Zoom out: On a macro level, soaring rents contribute to inflation — causing the Fed to raise rates and put the brakes on the economy. That puts the country closer to the possibility of a recession.

The terrible catch: A recession wouldn't bring much relief for renters. When the economy slows down, rents don't fall (take a look at that chart) — but people do lose their jobs.

  • One reason rent prices are a bit recession-proof is people are less likely to buy homes when the economy isn't doing well.

What's happening: Landlords are passing on their rising costs to renters.

  • Landlords are also capitalizing on the strong demand for housing, especially in the places where folks migrated because of remote work. Plus, people wanted more space and some traded up for more square footage.
  • That demand pushes up prices for everyone. Once landlords realize they can charge more for a unit, "they're going to keep increasing the price to capture as much profit as they can," Redfin chief economist Daryl Fairweather told Axios.
  • Increased demand also changes the kinds of housing on offer. When there's more demand for pricier apartments, landlords may upgrade units to charge more.
  • Finally, the U.S. faces a housing shortage, and shortages drive up prices.

Rent growth has slowed down a bit this summer, as the economy slowed, but prices are still climbing in strong job markets, Redfin reported recently.

Our friends at Axios Today asked listeners, especially those outside the big coastal cities, to text their experiences with this growing rent crisis.

  • From Columbus, Ohio: Amanda wrote that one of the reasons she's lived in the city as an adult was that "it's cheap." Now that's changed. Her rent is up $500 over the past six years and she and her boyfriend can't find a new place that doesn't cost hundreds more.
  • In Boise, which saw a surge of new higher-income home buyers recently, housing nonprofit employee Garrett says his rent went up $300 in June. "And unfortunately we're seeing more people than ever experiencing homelessness here in the Treasure Valley."

🎧 Go deeper: Listen to the Axios Today episode

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