Latest Inflation Numbers Show That Rent Is Too Damn High

“The latest Consumer Price Index (CPI) by the Bureau of Labor Statistics (BLS) shows that prices ticked up by 0.1 percent for urban consumers in August, for an annualized increase of 8.3 percent for the year. The marginal increase in inflation comes in spite of fuel costs falling 10.3 percent last month.
“Increases in the shelter, food, and medical care indexes were the largest of many contributors to the broad-based monthly all items increase,” said the BLS in its news release today. The latest CPI numbers show a 0.7 percent increase in shelter costs in August and 6.2 percent over the past year.

The BLS measures both cash rents paid by tenants and something called Owners’ Equivalent Rent—a measurement of how much an owner-occupied home could be rented for. The bureau doesn’t include home prices in the CPI.

Spot rents reported by listing companies are growing at an even faster rate. Apartment List reports a 7.2 percent increase in rental prices so far this year. That’s moderate compared to the 17.6 percent increase in rents the company reported in 2021. It’s still well above pre-pandemic increases from 3.4 percent and 2.3 percent in 2018 and 2019 respectively.

Rents plunged during 2020, driven by an urban exodus from high-cost coastal metros like New York City, San Francisco, Los Angeles, and Seattle. Many of those same cities are where rents are growing the fastest—alongside many of the Sun Belt metros where people fled to during the pandemic.

That suggests at least a partial reset of migration patterns during the pandemic. People are returning to the city (although not necessarily to the office).

The upshot is that the country’s housing affordability struggles aren’t going anywhere. Some analysts warn that they’re likely to get worse.”

Evictions are life-altering — and preventable

“Nearly 1 million people are evicted in the US each year, mostly for nonpayment of rent. Between 2000 and 2016, according to the Eviction Lab at Princeton University, one in 40 American renter households was evicted, and more than twice that share were threatened with it. The experience of losing one’s home to eviction has been linked to all sorts of adverse consequences, including higher job loss, debt, suicide, and reduced credit access.

Many evicted families are forced to relocate to lower-quality homes in neighborhoods with more crime. Evicted children experience higher food insecurity and lower academic achievement than other low-income kids living in rental housing, partly as a result of having to shuffle between schools and their parents’ declining mental health.”

“Claudia Aiken, a policy researcher at the University of Pennsylvania, has already found clear results from Philadelphia. Receiving emergency rental assistance was associated with a lower likelihood of incurring debt, a lower share of tenants reporting that they worried frequently, and a significant decrease in the amount of rent owed among those behind on payments. Other studies on preliminary impacts in Atlanta and Baltimore have found receiving rental aid is associated with reduced risk of homelessness and lower debt.”

“As states and cities cobbled together their rental assistance programs, policymakers quickly ran into several issues. Landlords weren’t always eager to participate because accepting the money sometimes came with requirements to forgive past penalties, interest, and court costs; or because participating barred landlords from chasing payments for anything outstanding in the months they received aid. Some states capped available rental assistance so low that many landlords saw accepting it as consenting to de facto rent cancellation while they were dealing with their own cash flow problems.

Some programs tried to grease the wheels to induce more participation. A Pennsylvania rental assistance program in place before ERAP launched had a monthly cap of $750, regardless of what rent was owed. But only 44 percent of landlords participated, so Philadelphia policymakers decided to pair state aid with CARES money to offer landlords up to $1,500 per month. This boosted Philadelphia participation to 63 percent.

Still, many landlords just wouldn’t bite. In a national survey of rental assistance programs conducted in spring 2021, 44 percent of program administrators said landlord responsiveness was a challenge. That number rose to 67 percent in summer 2021, and 74 percent in late 2021. As one ERAP administrator explained, “many landlords are not looking to keep unreliable tenants; some refuse to work with us; [and] others are not willing to renew leases.”

Landlord resistance is nothing new in federal housing policy. But to address the issue, Treasury took an unprecedented step. It said that programs must send money directly to tenants when their landlords don’t cooperate, and clarified that programs can even provide direct assistance to tenants before trying to engage the landlord. Not all programs embraced the idea, but many did.”