Why are rents increasing? Rents rose in the expensive housing market

Jennifer Fei, 48, has felt the pinch every year. But especially in the last couple of years, the rental market’s stranglehold on the household budget has been tightened.

She moved into a charming two-bedroom duplex in the Sugar House neighborhood of Salt Lake City about seven years ago. At the time, her monthly rent was $1,300, which she said seemed like a pretty good deal.

“Over the years, there have always been increases — $1[ads1]00 here, $50 there,” Fei told the Deseret News. When she signed the lease for 2020 to 2021, it went up $150.

Then, for 2022, it increased to $410, she said.

“Just in two years, I saw a $550 increase in rent,” she said. “So that’s pretty significant.”

Now Fei says her rent is just under $2,000 a month.

Meanwhile, her salary remains stagnant. As a sales representative, Fei said she makes about $60,000 a year. During the height of the COVID-19 pandemic, she said she was making less as the pandemic took a toll on her commission, which she earns by selling products to retailers and restaurants.

As a single mother of two teenage children earning what she considers a “decent” income, it’s frustrating that rent would be so expensive for a modest two-bedroom home – especially considering wages haven’t kept up with so fast prices. growth.

Still, she feels trapped. Fei has looked around her in the same neighborhood and seen the prices in the air. The typical two-bedroom apartment in her area “starts at $2,000 a month,” she said. “Most are $2,500 to $3,000 a month, especially in all these new condos.”

“Who can afford this?” she asked.

Utah’s median individual income was $31,855 in 2020, according to the US Census Bureau. For households, it was $74,197.

Why are rents so high?

As home prices in Utah and across the country soared to record levels during the pandemic housing frenzy from mid-2020 to early 2022, it has had an extraordinary impact on the rental market.

If renters — who faced steady, annual rent increases even before the pandemic hit the gas pedal — had a tough time before, the pressure is only increasing now as the housing market continues to decline from above 6% mortgage rates.

Even before the Federal Reserve’s fight against inflation, rents rose faster in the past two years than they have in the past decade.

Between 2010 and 2020, asking rents rose by 2.6% annually. Fast forward to between 2020 and 2022, and rents rose 10.5% annually in that two-year window.

That’s according to a new report published this week by the University of Utah’s Kem C. Gardner Policy Institute, written by Dejan Eskic, a senior researcher at the institute and one of Utah’s leading housing experts.

By Escic’s calculations, about 71% of Utah households were priced out of Utah’s median-priced home by spring 2022, which crossed the $500,000 mark in February. This number was even higher in Salt Lake and Utah counties.

As more potential buyers turn away from the market while home prices remain at record highs and mortgage interest rates not seen since 2008, it is increasing pressure on the rental market.

“The narrowing path to home ownership has increased the demand for rental housing,” Eskic wrote. “Rental households across the Wasatch Front experienced as much rent growth in two years (between 2020 and 2022) as they did in the previous ten (between 2010 and 2020).”

As a result, renters are caught between rising rents and out-of-reach house prices, vulnerable to annual interest rate hikes and potential instability if they are priced out of their current homes.

How much is rent in Utah?

Of all four Wasatch Front counties, Salt Lake County saw the biggest change in absolute rent growth, according to the report.

• In Salt Lake County, the average rental price grew from $1,213 in early 2020 to $1,534 in the second quarter of 2022, according to the report. That’s a jump of $321 – an increase of 11% each year, which equates to an increase of over 26.4% in two years.

“The two-year increase is greater than the $135 increase experienced between 2000 and 2010 and the $213 increase between 2010 and 2020,” Eskic wrote.

• Davis County comes next in terms of absolute rent growth, with average rent increasing $294 from $1,158 in early 2020 to $1,452 in 2022. That’s an annual increase of 10.6%.
• Weber County ranked third in absolute rent growth, with average rents rising from $1,091 in early 2020 to $1,380 in 2020, an increase of $289 at an annual rate of 11%.
• Utah County rents increased from $1,213 in 2020 to $1,475 in 2022, an annual rate of 9.1%.

Caught

Wondering how long she can hold on to her current home, Fei sees downsizing as perhaps the only option at this rate.

“Next year, if my landlord decides to raise the rent, I might have to move into a one-bedroom. That is the reality of my finances, she said. “If I don’t make more money, I can’t afford to stay here.”

She has thought about owning, but as a single mother at her age and the prices being what they are, she doesn’t see it as an option.

“I’m at a point now where I think I’m permanently priced out of the market,” Fei said. “I’m old enough, with teenage kids, don’t have enough savings … if I don’t have property at this point, 48 years old, I’m not going to do it. I mean, to be very honest.”

She questioned how anyone is able to save for a home down payment these days, especially given how quickly rents have climbed.

“I don’t know how you can save when the rent is 40% to 50% of your monthly income,” she said. “If I was in a better financial situation, yes, I would look. But at this point with interest and monthly payments, you’re looking at paying as much as rent these days.”

Fei also said her situation could get worse. She said that while she faces downsizing, other Utahns and their families could simply be priced out of rentals everywhere in the Salt Lake area. It’s not just monthly rental costs, but also deposits — first and last month’s rent — that break the bank.

Fei said that when she was driving down the street the other day, she noticed someone who had a dining table and was leaning on a dolly, along with a pile of his things next to him.

“These homeless people are not homeless because they have mental health issues or substance abuse issues,” she said. “They’re homeless because they get to the point where they can’t afford where they live and they have nowhere else to go.”