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Why is renting still so expensive?

Posted On Tuesday, 04 October 2022 13:41
Why is renting still so expensive?

Even though gasoline and fossil fuel prices have claimed most of the media attention during the cost-of-living crisis, paying for housing – especially renting – is crippling millions of Americans. In this guide, we’ll explain why renting prices in the US are continuing to rise.

  1. 1. Inflation

The results of a recent poll for the World Economic Forum showed that up to a quarter of people in developed countries were struggling financially. This is largely down to inflation – rising prices and decreased individual purchasing power. 

Even though the rate of rental price growth might finally be starting to slow down, Americans are still dealing with high, unaffordable prices. For any American trying to make a living, inflation has arguably become even more of a concern than Covid.

What’s more, higher rents are tied to rising house prices, making it almost impossible for ordinary families to afford somewhere to live during this crisis. These issues reflect an overall lack in housing supply; we’re now living the consequences of a national lack of construction following the Great Recession.

  1. 2. Supply and demand

In 2022, more people are living by themselves rather than with a partner or in a shared house. Even if you’ve been trying out different ways to grow your savings and build up credit, you’ll still face tough competition if you’re trying to get on the property ladder.

It’s not unusual for smaller studio apartments in urban areas to be bought out by investors, reducing the available market for young professionals genuinely seeking somewhere to live.

For anyone wanting to move to a major city, it’s still more expensive than ever before. In Manhattan, for example, the average monthly rent reached a record $5,000, and average rental prices in June increased by almost a third on the previous year.

  1. 3. Commercial competition

Certain business advisors suggest that landlords prefer to have their commercial properties occupied, rather than keeping them empty. Even if this could provide business owners with an opportunity to negotiate on rent, it still means that properties used for commercial purposes dominate certain areas, reducing potential housing opportunities.

Inflation directly affects small businesses the most, with commercial landlords taking in more cash than ever before. According to a recent poll, up to 40% of small business owners couldn’t afford their rent in August. 

Rent has only continued to rise since the beginning of the Covid-19 pandemic, but inflation in a competitive market now presents a complicated, challenging environment for families, individuals, and entrepreneurs alike.

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