Rents are rising. Redfin reported that the median asking rent in the United States reached $2,016 in June of 2022, which represents a 14.1 percent increase on a year-over-year basis. This number is particularly striking because it is the lowest increase since last October. Furthermore, it obscures how popular housing markets such as Austin, TX, Nashville, TN, and Seattle, WA are seeing more than 30 percent increases. Under these circumstances, U.S. residents are right to be concerned about the cost of rent in recent times.
How Can People Respond to the Rising Cost of Rent?
The causes for this trend aren't mysterious. For starters, inflation is happening throughout the world. Investopedia points out that there are two kinds of inflation called cost-push inflation and demand-pull inflation. Cost-push inflation is the result of the increasing cost of production inputs pushing prices upwards. Everything used to make goods and services available can cause it. Wages are no exception to this rule. Meanwhile, demand-pull inflation is the cause of the increasing competition for products pulling prices upwards. Simply put, more people wanting things means more willingness to pay higher prices for those same things.
Unfortunately, we are being hammered by both cost-push inflation and demand-pull inflation. Some of that cost-push inflation was caused by the Russian invasion of Ukraine. Said event caused oil prices to soar, which had an impact on just about everything because just about everything is affected by energy costs in some way. Still, the Russian invasion of Ukraine worsened an existing situation as noted by The New York Times. Essentially, resource producers reduced their production in response to the COVID-19 crisis. Often, this happened because of a lack of demand. To name an example, the price of a barrel of oil fell below $0 at one point in 2020 because the storage tanks had been filled.
The End of COVID
Now that most of the world has chosen to move on from the COVID-19 crisis, resource producers have started producing more. Currently, they are being held up by a couple of issues. First, there is a continuing fear of economic woes. As such, resource producers won't rush to return to their previous production levels as soon as possible. Second, resuming production levels isn't something that can happen in an instant. Even when the expertise and experience are there, resource producers can't just start and stop their processes with the same ease that people can start and stop consumer electronics. Both of these things are expensive and time-consuming, which explains much about resource producers' conservative decision-making. Combined, these issues are pushing costs upwards.
Moving on, demand-pull inflation has been an issue as soon as places started opening up in the wake of the COVID-19 crisis. More people doing more things meant more people buying more things. In turn, that meant increased competition for the reduced amount of goods and services that were being supplied. Some demand-pull inflation tends to be seen in a neutral light. Most people are less than pleased to see the purchasing power of their money being eroded. When that erosion is happening specifically because the economy is running well, most people will accept it as an inevitable part of the process. That is very much not the case at the moment. Yes, most of the inflation is cost-push inflation rather than demand-pull inflation. Despite that, the extra bit of demand-pull inflation still hurts.
Unsurprisingly, people are renting more under these circumstances. NPR and other publications have made it clear that consumers are being priced out of the home market. The issue is that people still need to live somewhere. Thanks to that, people are flocking to the rental market, which is causing the cost of rent to rise because of the increased competition. Rising interest in renting rather than buying a home was already a thing before the COVID-19 crisis. Since then, economic woes mean that the trend has intensified. Real estate developers are already working on increasing the number of available rental properties. Nonetheless, it can't be done in an instant.
Every single one of these issues is macroeconomic. As a result, there isn't much that interested individuals can do about them directly, particularly since so many of the causes lie outside of the United States anyway. Instead, people who are concerned about the rising cost of rent are going to need to work around it because experts such as Robert Triest believe that inflation won't see major reductions until after 2022.
What Are Some Strategic Options for When Rents Are Rising?
Here are some suggestions from Kiplinger on how people can respond to the rise in the cost of rent:
Check the Local Laws
The first thing that people should do is to check their local laws. There is no guarantee that this will prove to be beneficial for their case. After all, people are going to need not one but two things to be true for that to be the case. One is that they are going to need their local jurisdiction to have rent control laws. The other is that they are going to need their landlord's intended rent increase to violate those rent control laws. Still, checking the local laws is worthwhile. People might be living in a place that has rent control laws. Right now, there are just three U.S. states that have rent control laws, which would be California, New York, and Oregon.
Rent Control Laws
However, cities to pass rent control laws as well. Sometimes, these cities are situated in these three U.S. states. To name an example, the city of Santa Ana, CA has passed a law that limits rent increases to either 3 percent or 80 percent of the consumer price index for rental properties, which is better for renters than the state standard. Other times, these cities are situated in other states. For example, the city of St. Paul, MN has passed a law that limits rent increases to 3 percent. Similarly, the city of Miami, FL has passed a law that requires landlords to give 60 days' notice for rent increases of more than 5 percent. On top of this, the cost of rent has become a hot issue, so more jurisdictions might pass rent control laws in the future.
Having said this, the existence of rent control laws doesn't necessarily mean that renters can benefit even if their landlord is violating those laws. For instance, the expenditure of resources might not be worth it if renters gain just an extra month to prepare for the rent increase. This is particularly true if they are thinking about negotiating with their landlord because getting into a legal dispute has a high chance of making a relationship more hostile.
Seek Rental Assistance
Unaffordable rent is a widespread problem. Naturally, there are a lot of nonprofit organizations that can help out by providing rental assistance. Generally speaking, these operate on a local level. Fortunately, services exist to help people find nonprofit organizations that can help them. For proof, the Consumer Financial Protection Bureau has a page that is meant for this precise purpose. Interested individuals can enter a location to bring up a list of nonprofit organizations to look into. Furthermore, they can visit the links for their local area to see what comes up.
Most people are going to be looking for money. Be warned that these nonprofit organizations don't have unlimited money, meaning that they are going to be prioritizing some cases over others. Someone who is struggling because of a short-term issue that will eventually be resolved is likelier to receive assistance than someone who is living in a fundamentally non-viable situation, particularly if that person has a clear plan for getting themselves out of their situation that is backed up by documents and other kinds of proof. Even if people can't get assistance from these nonprofit organizations, they might be able to benefit in other ways. Having skilled and experienced support can improve their chances of finding a new place that they can afford on their budget. Likewise, these nonprofit organizations have been known to help people out with rent-related legal issues.
Negotiate With the Landlord
People might have no choice but to negotiate with their landlord. They will always have some leverage because of a couple of things. One, finding a new tenant takes time. Two, a new tenant will be a relative unknown. Unfortunately, their landlord will always have some leverage as well. After all, if people have no problem with moving out, they wouldn't be looking to negotiate in the first place.
In any case, there are several things that people can do to put themselves in a better position for such negotiations. First, they are going to want to make themselves seem as reliable as possible. That can happen through big things such as making sure that they always pay their rent on time, which is reliant on them never promising to pay more than what they can afford. Simultaneously, that can happen through small things such as making sure that they always arrive on time to meetings with their landlord. Second, they should start negotiating rent increases sooner rather than later. This is so that they can avoid negotiating when they are desperate because that gives more leverage to their landlord.
Does Negotiation Work?
Under ideal circumstances, people should negotiate during the less busy rental seasons so that their landlords will have less confidence that they can find another tenant that is just as good with minimal fuss and hassle. Third, people should check what other people are paying for similar units in the same area. That way, they can provide their arguments with the weight of evidence. Fourth, interested individuals might find it useful to suggest arrangements that will increase the landlord's expected income through either an increase in revenue or a risk reduction. If they are renting a parking spot, they might be able to give up that parking spot so that their landlord can rent it out to someone else. Alternatively, they might be able to convince their landlord to go for either a longer lease or several months' rent prepaid in exchange for reduced rent.
When none of these suggestions work, people will need to move to somewhere more affordable. The more time that people have to search through their options, the better their chances of finding something. That is one more reason why people should start negotiating with their landlord ahead of time. The want time to do whatever it is that they decide to do afterward. As mentioned earlier, nonprofit organizations can help out with this process. Therefore, people should make sure to take advantage of that service if that is an option.
Be warned that becoming a new tenant tends to be more expensive than renewing an existing lease when everything else is the same. Due to this, people who are looking for something more affordable than their current place should expect to make sacrifices. Moreover, people who can work remotely will have a massive advantage when compared to people who need to head to their workplace regularly. The first can choose somewhere further away with cheaper rents, which can be very beneficial because some areas are being hit much harder than others. In contrast, the second will need to look within a much smaller number of rental markets because there are limits to how long a commute people can put up with.
Raise Revenues and Cut Expenses
The final option would be raising revenues and cutting expenses until a person's budget is in healthier shape. Please note that this option is far from being guaranteed to work. It is very much possible for someone to be unable to afford their current place. This is even if they do everything to bring in more money while trimming their expenditures. When that is the case, that should be considered a clear sign to look for somewhere more affordable. Raising revenues tends to be the more difficult path. This is because people might not be able to get either a pay raise or more hours.
Even worse, getting a side-gig might not pay off. So, people might wind up spending money rather than earning money. For most people, the more realistic option would be trimming discretionary expenses. Sadly, that might not be enough. People might have no choice but to return to looking for a new place.
Written by Dana Hanson
Read more posts by Dana Hanson