More than 95% of states across the U.S. have seen a significant rise in the price of both 1-bedroom and 2-bedroom apartments compared to this time last year, according to Rent.com’s February 2022 Rent Report.
I sat down with Jon Leckie of Rent.com, a New York-based writer, researcher, and data journalist, to discuss trends to watch, future projections, and the possibility of an eviction crisis in New York.
Leckie points to pandemic-related migration trends as one of the contributing factors to the skyrocketing cost of rent.
“When the pandemic hit, a lot of people left major cities which increased prices in the suburbs and exurbs. But as rents fell in the core metros, some returned, others who couldn’t previously afford to live in the core metro now could. This increased demand and pushed prices back up to levels at or beyond what we saw before the pandemic. So, this population shuffle increased demand almost across all markets,” explained Leckie.
Along with spelling trouble for potential renters, the population shuffle also increased demand in the home buying market.
“People who could not afford a house in the city, could now move to the suburbs and do so while keeping their higher paying metro job,” said Leckie. “Many millennials are entering a period in life where they are starting a family and buying a house in the suburbs. Institutional investors have also been buying record levels of property. And social distancing policies along with the supply chain issues that followed the pandemic, put a pause on some new construction which squeezed supply.”
This means many millennials who wanted to settle down and buy a home have been priced out of the buyers’ market, which further increased demand in the rent market and drove up occupancy rates.
Rent.com’s February Report also shows a 13.54% year-over-year rent increase in New York from February 2021 to February 2022. According to Leckie, Rent.com predicts rents across the U.S. will continue to rise over the course of 2022, but at a lower rate.
“One reason for the extreme changes from 2020 to 2021 was a depressed market in many areas in 2020 due to the pandemic. So, while rents did rise in 2021, the percent change also reflects the dip in 2020 which created a larger spread than if rents had stayed flat in the early months of the pandemic,” explained Leckie.
Despite apartment occupancy rates reaching their highest percentage on record in December 2021, landlords shouldn’t fall for the “occupancy fallacy,” or expect high occupancy rates in the short-term to alleviate long-term concerns about vacancies.
“According to a November 2021 survey done by RentPath, 60% of renters indicated they planned to seek a new apartment or home in the next six months. So, while vacancy rates are low, and may even remain low, it doesn’t mean tenants aren’t moving,” said Leckie. “Landlords should be prepared to continue to see turnover in their properties, even if vacancy rates remain low.”
Rent.com’s February Report points out a January 2022 study from the Joint Center for Housing Studies of Harvard University shows many lower-income households have been greatly affected by low occupancy rates. Nearly 25% of Black renters and 19% of Hispanic renters were behind on rent payments in late 2021.
In New York, the state moratorium on evictions ended in January, meaning landlords can begin the process of evicting those who are behind on rent. Additionally, the federal funding for the Emergency Rental Assistance Program in New York has dried up completely. I asked Leckie if he though these factors could spur an eviction crisis in the state.
“It’s difficult to say with certainty if we are headed for an eviction crisis in New York, but it seems unlikely. It’s clear that the moratorium and rental assistance program worked given we did not have a crisis even when unemployment peaked above 16% in the state,” answered Leckie. “It also depends on which sectors are experiencing unemployment. Unemployment in low-income sectors may increase the risk of eviction while higher earners are more likely to have savings that can carry them until they find their next job.”
You can read Rent.com’s full February 2022 Rent Report here.