Why are rents increasing? Rent surged in expensive housing market

Jennifer Fei, 48, has felt the pinch yearly. However over the previous couple of years, particularly, the rental market’s stranglehold on her family funds has been tightening.

She moved right into a quaint, two-bedroom duplex within the Sugar Home neighborhood of Salt Lake Metropolis roughly seven years in the past. On the time, her month-to-month lease was $1,300, which she mentioned appeared like a fairly whole lot.

“Over time, there have at all times been will increase — $100 right here, $50 there,” Fei instructed the Deseret Information. When she signed her lease for 2020 to 2021, it went up $150.

Then, for 2022, it shot up $410, she mentioned.

“Simply inside two years, I noticed like a $550 enhance in lease,” she mentioned. “So it’s fairly vital.”

Now, Fei says her lease sits at slightly below $2,000 a month.

In the meantime, her wages stay stagnant. As a gross sales consultant, Fei mentioned she earns about $60,000 a yr. In the course of the top of the COVID-19 pandemic, she mentioned she made much less because the pandemic took a toll on her fee, which she earns from promoting merchandise to retailers and eating places.

As a single mom of two teenage kids who makes what she considers a “respectable” revenue, it’s irritating that lease can be so costly for a modest, two-bedroom residence — particularly contemplating wages haven’t saved almost in tempo with such fast worth development.

Nonetheless, she feels trapped. Trying round her, in her identical neighborhood, Fei has watched costs balloon. The everyday two-bedroom condominium in her space “begins at $2,000 a month,” she mentioned. “Most are $2,500 to $3,000 a month, particularly in all these new residences.”

“Who’s affording this?” she questioned.

Utah’s median particular person revenue was $31,855 in 2020, in response to the U.S. Census Bureau. For households, it was $74,197.

Why are lease costs so excessive?

As housing costs in Utah and throughout the nation ramped as much as report ranges throughout the pandemic housing frenzy from mid-2020 till early 2022, it’s had an extraordinary influence on the rental market.

If renters — who confronted regular, yearly lease hikes even earlier than the pandemic stomped on the accelerator — have been having a troublesome time earlier than, the strain is just mounting now because the housing market continues to reel from over 6% mortgage charges.

Even earlier than the Federal Reserve’s struggle with inflation, rents rose at sooner charges over the past two years than they’ve up to now decade.

Between 2010 and 2020, asking rents ticked up by 2.6% yearly. Quick ahead to between 2020 and 2022, and rents rose 10.5% yearly in that two-year window.

That’s in response to a brand new report printed this week by the College of Utah’s Kem C. Gardner Coverage Institute, penned by Dejan Eskic, a senior analysis fellow a the institute and one in all Utah’s main housing specialists.

By Eskic’s calculations, about 71% of Utah households have been priced out of Utah’s median-priced residence by the spring of 2022, which crossed the $500,000 mark in February. That determine was even larger in Salt Lake and Utah counties.

As extra would-be patrons flip away from the market amid nonetheless report excessive residence costs and mortgage charges not seen since 2008, that’s upping the strain on the rental market.

“The narrowing path to homeownership has elevated the demand for rental housing,” Eskic wrote. “Renter households throughout the Wasatch Entrance skilled as a lot rental worth development in two years (between 2020 and 2022) as they did within the prior 10 (between 2010 and 2020).”

Consequently, renters trapped between rising lease costs and out-of-reach residence costs are caught, susceptible to annual fee hikes and potential instability in the event that they’re priced out of their present properties.

How a lot is lease in Utah?

Out of all 4 Wasatch Entrance counties, Salt Lake County noticed the most important change in absolute development in lease, in response to the report.

• In Salt Lake County, the common asking lease grew from $1,213 in early 2020 to $1,534 within the second quarter of 2022, in response to the report. That’s a $321 soar — an 11% enhance annually, amounting to an over 26.4% hike in two years.

“The 2-year enhance is larger than the rise of $135 skilled between 2000 and 2010 and the $213 enhance between 2010 and 2020,” Eskic wrote.

• Davis County comes subsequent in line by way of absolute development in lease, with a median lease that elevated by $294 from $1,158 in early 2020 to $1,452 in 2022. That’s an annual enhance of 10.6%.
• Weber County ranked third in absolute lease development, with a median lease that went up from $1,091 in early 2020 to $1,380 in 2020, a $289 enhance at an annual fee of 11%.
• Utah County rents elevated from $1,213 in 2020 to $1,475 in 2022, an annual fee of 9.1%.

Trapped

Fei wonders how lengthy she will dangle on to her present residence, seeing downsizing as maybe her solely possibility at this tempo.

“Subsequent yr, if my landlord decides to boost lease, I may need to maneuver right into a one-bedroom. That’s the fact of my funds,” she mentioned. “If I’m not making more cash, I can’t afford to remain right here.”

She’s thought of proudly owning, however as a single mom her age and costs being what they’re, she doesn’t see that as an possibility.

“I’m at a degree now the place I believe I’m completely priced out of the market,” Fei mentioned. “I’m sufficiently old, with teenage youngsters, don’t have sufficient financial savings … if I don’t have actual property at this level, at 48 years previous, I’m not going to. I imply, to be very sincere.”

She questioned how anybody is ready to save for a house down cost as of late, particularly given how briskly lease costs have climbed.

“I don’t know how one can save when lease is 40% to 50% of your month-to-month revenue,” she mentioned. “If I have been in a greater monetary state of affairs, yeah I’d be trying. However at this level with rates of interest and month-to-month funds, you’re paying as a lot as lease as of late.”

Fei additionally mentioned her state of affairs might be worse. She mentioned whereas she’s going through downsizing, different Utahns and their households could also be merely priced out of leases in all places within the Salt Lake space. It’s not simply month-to-month rental prices, but in addition deposits — first and final month’s lease — that break the financial institution.

Fei mentioned that as she was driving down the road the opposite day, she seen somebody who had a eating desk and chairs on a dolly, together with a pile of his stuff subsequent to him.

“These homeless folks aren’t homeless as a result of they’ve, you recognize, psychological well being points or drug points,” she mentioned. “They’re homeless as a result of they get to a degree the place they’ll’t afford the place they dwell, they usually have nowhere else to go.”