Landlords Will Hike Rent By 8% This Year
by Kimberly Hoffman
Don’t expect any rent breaks (or cheesecake) from your landlord this year.
Alex Thornton, 34, a video producer based in Fort Greene, a hip enclave of Brooklyn, N.Y., is looking for an apartment to rent in neighborhoods across the borough. What he’s found: Prices are up considerably over last year and, on at least one occasion, the rent even went up after he and his fiancé Christopher expressed interest in a property. “The rent is increasing faster than people’s salaries,” he says. “Landlords want you to make 40 times the monthly rent per year and want tenants to have an unrealistically high credit score,” he says. “Even those who have a decent salary can’t find a place that would match their financial status.”
And it’s not just in New York. The majority of property managers are planning on showing little mercy to their tenants this year. Some 88% of property managers raised their rent in the last 12 months and 68% predict that rental rates will continue to rise in the next year by an average of 8%, according to a survey of more than 500 of Rent.com’s property management customers, which the site says represents thousands of rental properties and hundreds of thousands of rental units. That’s nearly three times the wage increase that most employees can expect this year.
What’s more, 55% of property managers said that they are less likely to offer concessions or lower rent in order to fill vacancies. One reason why they’re getting even tougher: They are in a stronger position than they were this time last year. More than 46% of property managers surveyed reported a decrease in rental vacancies in Rent.com’s survey and, in the second quarter of 2015, vacancy rates in the U.S. for rental housing was 6.8%, the lowest it has been in almost 20 years, according to data from the U.S. Census Bureau.
Despite this, many renters are spending more than 30% of their income on rent (the amount generally recommended) and need help qualifying for the lease. Around 43% of property managers reported seeing an increase in the number of applicants who do not meet the income requirements on their own and require a guarantor, Rent.com found, and 34% reported that renters are holding on tight to their apartments and renewing their leases (up from 29% in 2014), either because they face higher rents elsewhere or they’re choosing not to buy property.
The number of Americans spending more than half of their income on rent will rise by 11% from 11.8 million in 2015 to 13.1 million in 2025, a survey released last month by Harvard University’s Joint Center for Housing Studies and Enterprise Community Partners, an affordable-housing group, found. This calculation is based on rents and incomes only growing in line with inflation (2% a year). In 2013, more than one-quarter of all renters — or 11.2 million renter households — were spending more than half their salary on rent, 3 million more than in 2000.
“The need for affordable housing is already overwhelming the capacity of federal, state and local governments to supply assistance,” the study found. But the private sector is unable to supply new units at rents low enough to reach low-income renters, it added. “Indeed, as of 2013, the median rent of a newly constructed unit of $1,290 was equal to about half the median renter’s monthly household income, underscoring the urgent need for policy makers to consider enhanced levels of support for rental housing particularly for lowest-income households.”
New York and San Francisco are still the most expensive cities to rent in in the U.S. Rents in San Francisco surged 14% to $3,530 year over year for one-bedroom apartments available in September, a separate analysis of one million listings of 50 cities by apartment rental site Zumper found, and they rose by over 5% to $3,160 in New York. Rent has jumped in secondary cities too, including Oakland, Calif. (up 23% year over year to $2,030), Jacksonville, Fla. (up 16% to $870), Kansas City, Mo. (up 15% to $770) and Fresno, Calif. (up 17% to $770).
In New York, the real estate market is also dominated by brokers who charge a fee of 15% of the annual rent. On an apartment with a $2,000 monthly rent, Thornton needed a $3,600 broker fee, $2,000 deposit and $2,000 first month’s rent. “The effect on New York’s economy is not sustainable over the long-term,” he says. Real estate developers are charging “aspirational” prices in up-and-coming neighborhoods before — not after — the neighborhood has blossomed, he adds. “I think there are slightly lesser versions of this happening in smaller cities all over America. They have got us over a barrel. What else are we going to do? We have to move somewhere.” He’s still looking.