Rents are likely to continue to rise throughout 2022, although at a less aggressive pace than this past year.
Rental prices skyrocketed over the last year as the country began to recover from the COVID-19 pandemic and from the two-month recession in 2020 that came after nationwide lockdowns. For example, the rental cost for an average one-bedroom apartment has increased by more than 20% year over year.
Brian Carberry, the senior managing editor of Rent.com, told the Washington Examinerthat while it is difficult to predict the exact trajectory of the rental market for the year given the myriad factors at play, he expects prices to continue increasing in the coming months.
“Once the summer months hit, I believe rent prices will begin to climb a little more significantly with seasonality, but since we saw a big spike last year at that time, the year-over-year analysis won’t look as dramatic,” he said. “Every market will be different, and you’ll see some areas with price increases and others with price decreases.”
He noted that one trend since the start of the pandemic is that location is less prioritized than before because of remote work. While cities still have a large segment of the population wishing to live in them, which is keeping demand for apartment rentals up, some people have begun moving into less traditionally popular areas because of remote work, driving new demand in those places. Carberry said the ability to work remotely has reshaped the country’s rental markets.
“This provides the freedom to live essentially anywhere, so you are seeing secondary or satellite cities increase in popularity,” Carberry said. “This is creating more demand and competition in these cities, which will drive up rent prices, especially if there is more demand than supply.”
David Howard, the executive director of the National Rental Home Council, told the Washington Examiner that he has seen rents going up, too. Howard’s group represents the single-family home rental industry, so his analysis does not include apartments and multifamily rental housing. Single-family rental homes account for about half of all rental housing in the United States.
Howard said that because of the pandemic, 2020 and 2021 were an “unusual time” that created significant uncertainty in the rental housing market. One of the factors that threw the market into disarray was the national eviction moratorium, which ended over the summer and brought a bit more certainty back to the market.
In the single-family rental home space, most owners are small “mom and pop” operations, owning between one and three homes to rent out. Those owners were walloped by the eviction moratorium because one renter not paying could equate to a sizable loss of income as opposed to a renter not paying in a massive apartment complex.
Howard said he thinks that the eviction moratorium has generated some long-term effects. For one, some of those rental property owners have sold or are selling their homes and getting out of the market simply because it has become too difficult to operate in the space.
He said another lasting effect could be that renters will find it more difficult to find rental homes because owners who made it through the moratorium are going to raise their standards in terms of whom they’ll rent their homes to and what they’ll be looking for in terms of security deposits and credit checks.
While rental rates have exploded since the pandemic, Howard predicts that the rate of increase will begin to slow in 2022, although he doesn’t anticipate rental rates for single-family homes falling this year.
“Frankly, there just is not enough housing to meet the demand that is out there for single-family homes,” Howard said. He added that a key dynamic was that many people moved out of apartment buildings in major cities and decided to move out of city centers and try to find single-family housing rentals, especially given that remote work has become mainstream.
Not only are single-family home rental rates on the rise, but so are apartment rentals in large cities.
Nancy Simmons is the founder of Apartment Detectives, a company based in the Washington, D.C., area that helps people find apartments to match their list of criteria. She said that in her decades of running the business, she has never seen an upheaval in the rental market as intense as during the pandemic.
“This has been absolutely totally different than we’ve ever seen,” she told the Washington Examiner.
She said the trajectory of prices for apartments in the Washington area has been on the rise this past year and that those higher prices will likely continue into 2022. She added that part of the increase has been driven by more offices requiring workers to return to in-office work.
Prior to the growth, many apartment buildings in the city were offering deals such as one month of free rent to lure people back, but in recent months, those deals have evaporated as vacancy levels decreased, Simmons said.
The Federal Reserve may also influence rental prices this year. Fed officials are projecting a series of interest rate hikes in the coming months and years, the first of which could come as soon as March. Mortgage rates will end up trending higher because of the central bank’s actions and thus will increase costs to homeowners.