Which of the following would lead to an increase in the demand for rental apartments in your area

Rents continue to rise at the fastest pace in decades, making housing costlier than ever for many Americans.

Nationally, rents rose a record 11.3 percent last year, according to real estate research firm CoStar Group. That fast pace of growth remained elevated in the first months of 2022, as many parts of the country continued to notch double-digit jumps in rent prices.

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“A supply-demand mismatch is making rents unaffordable,” said Dennis Shea, executive director of the J. Ronald Terwilliger Center for Housing Policy at the Bipartisan Policy Center. “The lowest-income families are being hardest hit by rising rents and a lack of supply.”

The number of people — particularly younger Americans — looking for their own apartments is squeezing an already tight housing market. At the same time, pandemic-related material shortages and construction delays are slowing down the production of new homes and rentals. Experts like Shea say the shortfall of affordable rentals is likely to get even worse in the coming months, as mortgage rates, already reaching highs not seen since 2011 thanks to rising interest rates, drive would-be homeowners to rent instead.

Although few places in the United States have escaped recent hikes, rental spikes have been particularly pronounced along the Sun Belt and in Florida. The state is home to the three metro areas where monthly rent jumped the most: Naples, Sarasota and Tampa. Monthly rents in those cities are up between 29 percent and 39 percent in the past two years, according to CoStar.

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“The ability to work from home persuaded a lot of households to relocate to warmer, less expensive locations,” said Jay Lybik, national director of multifamily analytics at CoStar. “People started saying, ‘Why am I staying in the Northeast where it’s freezing cold, when I could move to Tampa or Fort Lauderdale, have my own apartment, and be outside all the time?’ We saw huge spikes in demand in those markets.”

There has also been a migration from pricey city centers — such as San Francisco, New York and D.C. — to more affordable suburbs, particularly as many white-collar workers in high-paying industries such as tech and finance transition to more flexible remote-work arrangements.

And although early in the pandemic, many cities, states and management companies placed limits on rent increases and in some cases, froze prices altogether, most of those measures have expired. In some cases, renters say landlords are factoring in two years’ worth of increases when leases renew.

Overall, CoStar is forecasting another 6 percent rise in U.S. rents this year, about double pre-pandemic norms.

The burden of rising rents falls heaviest on younger households, as well as on Black and Hispanic families, further exacerbating long-simmering inequalities.

Nationwide, about two-thirds of American families owned their homes as of the end of 2021, according to the Census Bureau, but the same release shows a majority of Black and Hispanic families rent their homes or apartments, while just over a quarter of their White peers do the same.

Separately, 62 percent of families with heads of household under age 35 rent, compared with 30 percent of households with a head between ages 45 and 54.

Low-wage workers are also disproportionately being impacted. There is not a single state, metro area or county in the United States where a typical minimum-wage worker can afford a two-bedroom rental, according to a recent study by the National Low Income Housing Coalition.

In Tampa, Max Corey’s rent recently skyrocketed by 30 percent to more than $1,000 a month. The musician and street artist, who has been living with a roommate for more than two years, says housing has become unaffordable. He’s been picking up food delivery gigs to make ends meet.

Corey briefly looked for his own one-bedroom apartment, but says he was deterred after the asking rent jumped from $1,200 to $1,450 in a matter of weeks.

“It’s embarrassing but I really can’t afford to live alone,” the 34-year-old said. “It feels like every time I’m getting close to getting ahead and getting a little bit more stable, there’s a new challenge.”

About this story

Rent prices are for units in multi-family properties and based on estimates from CoStar Group. County data is shown where available and limited to counties with at least 1,000 multi-family rental units, according to the Census Bureau. Metro-area totals are based on weighted averages of counties with available data.

There’s no denying that the cost of living continues to increase. The price we pay for food, transportation, clothing, shelter, airfare — virtually all goods and services — is on the rise. And like every other sector of the economy, housing providers and the more than 40 million Americans who live in apartments are facing steep costs.

But why exactly are rents rising and what can be done to help stabilize housing costs? A number of factors that affect the housing market make it impossible to pinpoint exactly when the rental market will stabilize, but here are some important insights into what’s driving our nation’s housing dilemma.

A significant imbalance

Rising rents are largely a byproduct of limited supply and high demand across the rental market. Today, rental housing demand is sky-high — with a record 97.6 percent occupancy rate — as three generations are choosing to rent, including baby boomers who are interested in downsizing, millennials and recent Generation Z college graduates. Further, new household formation is on the rise after two years of tamped demand due to the covid pandemic; three years’ worth of graduates are emerging to find rental housing, and households that may have condensed during the pandemic are beginning to disperse as individuals look for their own homes.

Our nation is also facing a decades-long supply and demand imbalance. We need to build 328,000 new apartment homes at all price points each year just to meet the current demand, yet that level of construction has only occurred five times since 1989. Further, a significant portion of the nation's housing was built before 1980 and requires considerable investment and capital improvements to remain operational. Current challenges like severe undersupply, labor shortages, inflationary pricing and supply chain delays are further raising costs for housing providers and presenting challenging barriers to building and rehabilitating housing.

The white-hot housing market — fueled by shortages of all housing types, including single-family owner-occupied homes — continues to push up costs for mandatory operational expenses like property taxes and insurance premiums. Housing providers must cover these expenses to keep their rental properties available for residents, which means rents may need to be adjusted to keep up with the operational expenses and overdue capital improvements.

Taking action

There is no solitary solution that will immediately address our housing shortage, but there are steps that can be taken to set us on the right path.

Reducing regulatory burdens and encouraging the rehabilitation and development of all housing types will help secure the nation’s aging stock and enable more homes to be built to meet demand. The Biden administration has recently announced a multifaceted plan that will help our nation address housing challenges head-on, by encouraging zoning reform — 75 percent of residential land is zoned for single-family use — and deploying new financing tools to build and preserve both market-rate and affordable housing.

Additionally, we must address the lack of affordable housing for low- and moderate-income families by reforming and improving the Section 8 Housing Choice Voucher (HCV) program. By overhauling and investing in this program, we can create an effective solution for getting people into homes that they can afford.

Looking to the future

While there is no exact date when we can expect rents to stabilize, the industry and its residents can expect some relief as global supply chain issues are addressed and access to necessary building materials is increased. That, in addition to an increase in skilled laborers, will help strengthen the labor market and reduce construction and maintenance delays currently hampering the housing supply.

The first step to solving any problem is understanding the problem. Knowing that a lack of supply and heightened demand have left our nation, and millions of Americans, with a severe housing crisis allows us to dig deeper into the root causes and address them properly. While there is no quick fix, responsible policies that will address the underlying issues placing upward pressures on rent — the nation’s supply/demand imbalance — needs to be the focus.

Robert Pinnegar is president and CEO of the National Apartment Association in Arlington, Va.