Rental trends in 2022
The year of 2021 was full of highs and lows. This year will be no different. These are the rental trends you should expect in 2022.
Every year, the rental market adjusts and continues to grow. This upcoming year will be no different.
The effects of the COVID-19 pandemic drastically affected the rental scene- and not for the better.
Landlords had to build themselves up from the lows of 2020. Unfortunately, this meant that most chose to catapult rent prices to an all-time high.
Now that we're in a new year, is this trend going to slow down? What should renters expect in 2022?
We can't talk about this upcoming year without discussing the last.
Rent only got more expensive throughout 2021.
This past year alone, the average cost of rent went up almost 11%. This is a massive jump from 2019- where the rent had only increased 0.3%. In 2020, rent went up 0.6%.
Let's math this out. A $2,000 rental unit in 2020 would have a rent price of $2,220 in 2021.
Alternately, studies claim that the average salary increase by November of 2021 was around 3%. This was (surprisingly) the highest pay increase for workers since 2008.
We also cannot fail to mention that this study doesn't factor in those who work low-wage jobs. Thus, people who earn minimum wage would have gotten a $0-$1.50 increase depending on what state they live in.
So, according to these numbers, the average rise in pay isn't mirroring the rent increase.
Yet, rent prices are NOT going to drop in 2022.
Despite Covid-19 still putting a lull in businesses and world affairs, it's doing quite the opposite for the rental market.
Analysts from Realtor.com have forecasted that rent will go up 7.1% in 2022.
So, let's go back to our previous calculations. This means that by the end of 2022, the cost of rent for that previously mentioned unit would be $2,380. Remember- we started with a $2,000 apartment in 2020.
Renters will continue to lose apartment space to save money.
Many renters are being pushed out of their apartments because of sudden rent hikes.
We've seen people get their rent increased by up to $1,000 this past month (January 2022). Not only is this hike absurd, but it's unaffordable. Very few people have paychecks that are large enough to support this change.
Many renters are moving out of their rentals in exchange for cheaper rent. However, this is only viable by moving to less desirable locations or into smaller homes. Most people are choosing the latter.
CNBC interviewed a teacher that went through this exact situation. She lost 150 square feet of space in her new home after she moved- due to a $400 rent increase. This was the only way she could get cheaper rent.
This event isn't just occurring to a handful of people. It's happening all over the US.
We’ll see more short-term tenants becoming long-term renters.
The rise in long-term tenants isn’t unexpected. It's all the product of a domino effect that's taking place in the housing/rental market.
So, let's set the stage.
It's no secret that home prices have drastically increased over the years. This presents a challenge for people who want to buy homes. In 2021 alone, homes experienced a steep 19% increase in their prices.
So, what do people do if they can't purchase a home? Well, they rent.
In case you don’t believe us, we can also verify this claim through national vacancy rates. At the beginning of 2021, the rental vacancy rate in the US sat at 6.8%. By the end of the year, the number of available rental units had dropped by 1%.
As a result, the demand for rental properties continues to outpace rental supply.
Experts are blue in the face from stating this fact. The supply for rental apartments is not matching the national demand. As such, the lack of housing has stifled economic growth within the rental market. Not to mention that higher competition is driving rent inflation.
However, apartments aren't built overnight. So, we can expect to continue seeing the demand outweigh rental supply in 2022.
Many more built-to-rent homes are under construction to help solve this issue.
Real estate developers are ramping up the construction of built-to-rent homes. Not only does it help fix the housing demand, but they also capitalize on profit.
This concept is fairly new to the rental market. Investors start by buying neighborhood lots or land. Then, they develop them into rental communities.
These communities include multiple buildings with single-family apartments, common areas, and amenities.
In 2021, 6% of new builds were built-to-rent homes. We expect this number to double in the next decade. These builds are also the fastest-growing division in the US housing market.
The issue with these homes is that they don't help the unaffordable rental market. Built-to-rent communities charge such high rent that tenants have no room for savings.
On top of that, rent prices are increasing faster than home prices.
Strangely enough, the cost of monthly rent is rising far quicker than that of homes.
The chief economist for the National Association of Realtors has stated that home prices will only increase between 3% to 5% this year.
So, what does this all mean?
Expect to continue renting in a costly market in 2022.
The affordable housing crisis will continue to take renters by storm.
Despite this, not all hope is lost. The struggle to pay rent is starting to get addressed.
Attention is being shifted towards stricter rent control policies.
Many people are bringing awareness to the nation's weakly-controlled rent policies. As such, the urge for regulatory efforts within the rental market is accelerating.
High rent costs could be solved by setting rigid rent control policies within the government. This could be the only way to preserve and re-establish affordable housing nationwide.
What should renters do for the time being?
The truth is that you can only really help your own situation. There isn't much you can do for the rental market as a whole.
For those that got unfeasible rent increases, it's best to look into moving to a new apartment.
We suggest looking at the following factors when searching for cheaper rent. Firstly, see if you can compromise on location. Rent will always be cheaper in the suburbs vs. the city.
Secondly, you could consider moving during a specific time of the year. Rent is always more affordable during the winter months.
Another more obvious suggestion is to write out all your expenses and stick to a budget that works for you. If you’re not looking to move, you can always re-work a budget to cut costs elsewhere to fit your higher rent.
Lastly, we know that these are all small solutions to a much bigger issue. Yet, it's a start! Let's all hope that 2023 brings more positive growth to renters and the market.
If you are willing to move, we recommend you look into rent that gives you cash back. Our team of Lightkeepers and app at Lighthouse help you find a new home that gives you up to $1,000 in cash back.