The cost of living has definitely gone up, and this includes rent. All across America, people are grappling with skyrocketing rent prices that are forcing many to really reconsider the cost of housing. As leases are up for renewal and the demand for rentals increases, landlords and property owners are raising rental prices at astounding rates. In cities such as New York and Los Angeles, people are seeing rent increases as high as 50%. These rent price hikes are pushing many people out of the rental market raising cause for concern. So, what exactly is behind the rising rents in America? Is it a sign of housing demand or is it simply greed?
The Effect of Inflation on Rent
Inflation is definitely here causing the cost of products and services to rise. For those who are seeking housing, inflation can make obtaining affordable housing difficult. However, for property owners, inflation means more income through raising rental costs.
To Rent…or To Buy? That is the Question
With the cost of rentals rising, why don’t some people choose to purchase property? Well, some people don’t want to buy a home at this time. Likewise, some people opt not to purchase a home because they simply can’t afford to. Inflation not only increases the cost of rentals but also the cost of homeownership. With rising interest rates, a house that would have been affordable several months or even a year ago could now be out of reach financially. Likewise, in a seller’s market, there is a lot of competition for housing and people are willing to pay big bucks for the desired home. So, even though there may be houses available, they may not be affordable due to the rising interest rates and other costs associated with homeownership.
If people can’t afford to purchase a home, the next option is renting. In this climate, it appears that the increased demand for rentals combined with decreased rental property supply puts property owners at an advantage. This means that property owners can request higher rental rates either because they simply want to and/or because the process of maintaining a rental at this time is higher due to the increased costs of services and goods due to inflation.
Are Property Owners Really Profiting?
In general, property owners are earning more money due to inflation. However, it is important to note that some of the increased cash flow is offset by the increased cost of managing and maintaining rental properties. Some of the expenses that increase due to inflation include landlord insurance premiums, property and mortgage rates, and maintenance costs.
So, while landlords are making more money right now by increasing rent rates, those extra rental dollars are offset by the additional money needed to maintain rental properties. It is also important to consider how inflation is affecting us in general. If the amount of money we make stays the same but our expenses increase, we feel the strain. Real estate is about making a profit. Understanding this, property owners can choose rental rates that will allow them to make a profit while covering the rising costs of maintaining the rental property under inflation.
Do Rents Have to Be So High?
So, do rents have to be so exorbitantly high? Well, it depends on what the property owner desires. In a situation where there is a high demand for a property, the property owner is in a position to raise the rent to get the best tenant at the highest rental rate allowed. It really is a case of supply meeting demand. Property owners have the right to raise rental rates as they please per local and state stipulations and regulations. It is for this reason that rents in New York and California and other popular urban areas are currently so high. Property owners are taking advantage of the high demand for coveted real estate in a low-supply environment.
Rents don’t necessarily have to be so high. Some would argue that property owners are taking advantage of the current climate to line their pockets at the disadvantage of tenants seeking to secure or maintain housing at a relatively affordable rate. Ultimately, property owners make the call as to how much they charge for rent even if it is not necessarily financially beneficial for those seeking affordable housing.
While landlords and property owners are allowed to raise rents on their properties, renter’s rights are in place to protect people from unscrupulous rental practices. In general, property owners are not allowed to raise rent under certain circumstances. Some stipulations that prevent property owners from increasing rental rates include raising the rent on an active lease, failure to provide advance notice of a rent increase, raising the rent on a rent-controlled property, and rental increases that are above the allowed percentages as stated by local and/or state laws.
It is important for renters to be cognizant of their rights to determine whether rental increases are legal. While a higher demand for rental properties allows property owners to request higher rental rates, property owners are still subject to local and state rental rules and regulations. It is vital that current renters understand their rights, especially in a climate where property owners have the upper hand in the rental market.
What You Can Do to Manage Rising Rents
Given that housing is a necessity, managing the rising cost of rent is vital. Some people are opting to search for more affordable rentals in a competitive rental market. Others are choosing to stay put and accept higher rental costs because they simply can’t afford the cost of moving. In either circumstance, managing higher rents is a necessity. The following are ways to ease the blow of higher rental costs throughout the nation.
Seek Renter’s Assistance
In many jurisdictions around the country, renter’s assistance is available. During the COVID-19 shutdown, rental assistance was offered to help people pay rent due to being forced to shelter at home. Some of these rental assistance programs are still actively taking applications and have assisted millions of people with maintaining housing. Those who are looking to combat the high cost of rent are encouraged to seek out local rental assistance programs.
An extra person to help pay the rent is welcome, so consider a roommate. Make sure that subleases are allowed if necessary. Likewise, make sure that potential roommates are able to pay the rent. When considering a roommate, it’s best to do your due diligence by interviewing potential roommates and verifying identity, background, and proof of income.
Having a roof over your head is a necessity, so now is a good time to scale back on luxuries. By readjusting your budget and cutting away extra expenses, there is the potential to free up money that can be used toward paying rent. This doesn’t mean that luxuries are off the table, it simply means that necessities such as rent are most important and have to be prioritized. Treat yourself…after the rent is paid.
Seek Additional Sources of Income
Find ways to earn additional income to manage the cost of higher rents. From obtaining a part-time job to seeking out freelance and/or contractor positions, there are ways to create more income to meet higher rent costs. Consider increasing income as a means to meet higher rent costs at this time.
Ultimately, the combination of inflation and the high demand for rental property has rental prices soaring across the United States requiring many to make adjustments in order to secure and maintain housing. While property owners have the option to raise rents within limits, it’s important that renters understand their rights when considering the best rental options at this time. For those seeking rental property at this time, consider whether it is better to make a move to secure a more affordable rental or remain in a current rental and take steps to reduce expenses to adjust to higher rental rates.