Rent price growth topped home price growth in August, rising by over 10% year-over-year for the first time on record, a Realtor.com report found. The average national rent is now $1,633, up $169 and 11.5% year-over-year. Home prices in the same month grew 8.6%.
Rents reached their highest levels ever in 35 of the 50 largest U.S. metros. All but 4 of the 50 hit record highs between June and August.
Two-bedroom units saw the most significant median national growth, up 12.3% to $1,828 year-over-year. Compared to August 2019, it’s even higher: up 16.7%. One-bedrooms rose 11.6% from the same time last year and 14.3% since August 2019. Both broke the record for highest levels in Realtor.com’s data history.
Rents for studios also increased, but not as dramatically. They declined 5% in early 2021 but have trended back up as residents return to cities. Nationwide they’re up 8.3% year-over-year, and only 8.1% since August 2019.
Growth rates have slowed compared to May 2021 (+3.0%) and June 2021 (+3.2%). But even after slowing to 1.6%, they have overtaken housing prices, which are cooling slightly as inventory increases and sticker shock scares potential buyers off. Those buyers then stay in their rentals longer than they may have otherwise.
“Record high home price growth has priced many renters out of buying, leaving many facing higher rents this summer as more households look to move thanks to the rise of remote and flexible work arrangements,” Redfin Lead Economist Taylor Marr said.
“The end of pandemic eviction moratoriums and mortgage forbearance may also cause landlords to raise rents to cover the risk of future tenant protections or make up for lost rental income,” Marr added.
Rent delinquencies have declined in 2021. According to a statement from the Biden administration, “the percentage of renter households behind on rent has also fallen from 19.4 percent to 15.4 since the beginning of this year.”
On September 1, the White House released its plan to increase the supply of affordable rental properties. Among the initiatives announced by the Biden administration are:
- Relaunching the partnership between the Department of Treasury’s (Treasury) Federal Financing Bank and the Department of Housing and Urban Development (HUD) Risk Sharing Program in order to enable eligible state housing finance agencies (HFAs) to provide low-cost capital for affordable housing development;
- Raising Fannie Mae’s and Freddie Mac’s (the Enterprises) equity cap for the Low-Income Housing Tax Credit (LIHTC), the largest federal program for the construction and rehabilitation of affordable rental housing;
- And making more funding available to Community Development Finance Institutions (CDFIs) and non-profit housing groups for affordable housing production under the Capital Magnet Fund.
The Realtor.com data mirrors a Redfin report that found that while rents have yet to surpass mortgage payments, the latter is trending down while rents continue to climb steadily.
Here are some more highlights from the report:
- August is the first month on record where rent growth reached double digits.
- Metros with the highest growth: Tampa, FL; Riverside, CA; Miami, FL; Phoenix, AZ
- Bay area (San Jose and San Francisco) rent is growing after months of decline, up 7% and 1.4% year-over-year.
- Boston, San Jose, New York City, and San Francisco didn’t break their records, but, notably, their highest growth rates were all in 2019 or 2020.