“Oh my yes!” That’s what real estate consultant John Affleck told Axios when asked if rent increases like the ones in the chart above were unusual.
State of play: From 2015–2019, the average annual rent growth across major markets was 3.5% — but in 2021 it was 13%, said Affleck, senior vice president of research at John Burns Real Estate Consulting.
- And in some Florida cities it was as high as 30% or more.
Meanwhile, a measure of rent prices in the Consumer Price Index, released last week, showed rents up 3.8% in 2021. That’s higher than the historical average but certainly nowhere near those other numbers.
Why it matters: Rising rents are part of the story on inflation and the housing crunch. They’re particularly painful for Americans already devoting a large part of their income to housing.
- But rent data is difficult to parse and the numbers can be confusing.
Let’s dig in! Affleck’s numbers show asking rents at institutional properties — mostly large 50-unit plus buildings. That’s in line with the eye-popping numbers you see coming from other private sources like real estate company Redfin.
- The numbers don’t include renewal rent rates. When you just renew your lease, rent increases tend to be lower. Plus, mom-and-pop properties aren’t included in Affleck’s numbers and are more difficult to track.
- As for the CPI data, the Labor Department surveys a sample of renters and landlords at all kinds of buildings — and does include renewals. That’s one reason you get a much lower number.
The big picture: Rents are going up for a bunch of reasons, all tied to changes in demand relative to the limited housing supply, Axios reported earlier this month.
- In this pandemic world, people are at home a lot more, said Daryl Fairweather, chief economist at Redfin. They want to live in nicer homes, if possible.
- Workers are also migrating out of bigger, more expensive cities and into lower-cost places in Florida, Austin and Phoenix, taking advantage of the remote working world.
- Plus, with housing supply so low, there are even more renters looking for places to live who’d otherwise buy a home.
Flashback: The highest rent growth ever recorded? Affleck said it was a 45% increase in San Jose in 2000, followed by the largest decline on record of 25% in 2001, after the dot com bust.