Over the course of the past year, rent prices have soared on a national level. The median rent for a one-bedroom apartment rose 9.2% since 2020's second quarter, according to Zumper's most recent index, while the median rent for a two-bedroom climbed 11%.
A big part of the reason behind this increase has to do with an uptick in demand. Last year, many people put their plans on hold during the pandemic. Some younger people moved in with their parents. Others got temporary housing in the absence of being able to commit to a longer-term lease.
But the U.S. economy has improved tremendously since the nightmare that was 2020. In August, the national jobless rate reached its lowest level since the start of the pandemic. As such, more people are looking to secure housing and have the means to pay for it. And that's something landlords may be taking advantage of, and understandably so.
But increased demand may not be the only factor driving up the cost of rent. Eviction bans may have played a role, too.
Compensating for lost revenue
The CDC eviction ban that was put into place last year and expired in July was meant to protect tenants and prevent a widespread homelessness crisis. And that it did. But it also hurt landlords in the process.
While larger property management companies may have fared reasonably well over the past 18 months even while missing some rent payments, mom and pop landlords -- those with only a few rental properties to their name -- bore the brunt of the pain. In fact, things got so bad that the eviction ban is said to have driven 12% of landlords out of business entirely.
Meanwhile, those landlords who are still in business may still be missing out on income they're entitled to in the form of past-due rent payments. And while the CDC's eviction ban is no longer in place, many states have their own protections that haven't yet expired, leaving landlords in the lurch.
Now there is a $45 billion pool of rental-assistance funds designed to help delinquent tenants catch up on their housing payments. But the rollout of those funds, which are supposed to go into landlords' pockets, has been slow. As such, it's not unreasonable to think that part of the reason rent prices are soaring is that landlords are compensating for their missing payments by upcharging tenants who sign new leases.
While that may not be the primary factor driving rent prices up, many landlords are now operating in desperation mode in an effort to save their businesses. Those that don't have access to large amounts of capital can't, at this point, afford to sit back and keep waiting for rental assistance funds to arrive. And so some may be taking matters into their own hands by asking for more money from tenants who can pay.
Hopefully, in the coming months, the distribution of rental-assistance funds will pick up steam. But until then, landlords may need to do what they have to do to stay afloat. If that means charging a premium for new leases, they'll continue to do it as long as tenants are willing and able to pay.