Inflation

What to Do When the Rent Is Too High

Rent prices are soaring nationally, and housing shortages are compounding the crisis. While the options for consumers are limited, there are some things you can do when facing a rent increase.

If you’re renting your home, chances are your wallet might feel it when your lease renews this year as rents around the country are skyrocketing at a record pace. Nationally, one-bedroom apartments saw an increase of more than 24% in the last year, according to Rent.com. Some metro areas have seen increases as high as 40%, according to Redfin, and only  two of the country’s most populous metro areas posted rent decreases (and those were slight).

While your choices are sparse, there are some things you can do if your landlord raises your rent to a level you can’t afford. We’ll get into the details, but the main categories of steps you can take involve:

  • Checking your local laws
  • Looking for rent subsidy programs
  • Negotiating with your landlord 
  • Considering a move

Why Are Rents Increasing?

Before considering your options, it’s helpful to know the reasons for the spiraling rents. Primarily, experts say, it’s a matter of supply and demand. We haven’t been building enough residential units since the real estate collapse and recession around 2008; and now our largest generation, the millennials, is establishing their own households. Also, construction costs have continued to rise while the construction industry grapples with a labor shortage some say is exacerbated by a tightening of immigration policy in the last few years.

“Historically, for the past decade or so, there have not been a lot of new starts in multifamily housing construction,” said Mitria Wilson Spotser, director of housing policy for the Consumer Federation of America. The same has held true for single-family homes. “A lot of people who want to buy can’t buy.” This increases the number of people who need to rent.

According to Realtor.com, home prices were up 26.5% in March, compared to two years ago, while the number of active listings for sale was down nearly more than 62% in the same time frame. At the same time,the national rental apartment vacancy rate is 7.3%, the lowest it’s been since 1981 when it was at 6.4%, according to data from the National Multifamily Housing Council. Every state has lost low-rent housing units since 2011, according to the Joint Center for Housing Studies at Harvard University.

“We saw hints of it pre-COVID,” said Caitlin Sugrue Walter, vice president of research for the National Multifamily Housing Council. “And then it really accelerated during COVID. A lot of demand changes that were going to happen happened really quickly.”

One COVID-inspired change — the increase in telework — may actually prove beneficial, giving some renters flexibility to move to lower-rent areas, Walter noted. But rent increases are having the biggest impact on low-paid workers who are less likely to have remote employment as an option. And remote workers moving may be contributing to the upward pressure on rents in some areas that have drawn an influx of new residents.

Where Are Rent Increases Hitting Hardest?

Generally, experts say, the sunbelt is seeing the biggest increases, although New York and New Jersey are also hard hit. It seems every real estate company has different criteria for assessing geographic rent trends and averages.

According to Redfin, for example, the five metro areas with the biggest rent increases since last year are:

  1. Austin, TX at 40%
  2. Portland, OR at 39%
  3. New York at 36%
  4. Newark, NJ at 36% 
  5. Nassau County, NY 36%

Rent.com had a slightly different list. Its top five increases for one-bedroom rentals:

  1. Long Beach, CA, up 56.7%
  2. Chandler, AZ, up 50.8%
  3. Amarillo, TX up 46.6%
  4. Huntington Beach, CA up 44.9%
  5. Jersey City, NJ up 43.6%

Zumper.com, which helps people find rental homes, lists the cities with the highest median rent prices for one-bedroom apartments:

  1. New York at $3,260
  2. San Francisco at $2,910
  3. Boston at $2,660
  4. Miami at $2,500
  5. San Jose, CA at $2,420

Overall, Jay Parsons, vice president and head of economics at RealPage, a firm that provides property-managment software, said the biggest increases have been in Florida and the desert region. 

“First,” Parsons says, “these areas are seeing a ton of demand and in-migration from other states. They’ve benefited from strong economic growth, as well as the appeal of destination markets in a work-from-anywhere environment. Additionally, these markets simply tend to be more volatile historically. They were also the places that saw the biggest declines in rent and home prices back in the great financial crisis and took a longer route to recover.”

Zumper’s report says Miami had the most rent growth of any city in 2021, pushing its way up their list of most expensive cities. Moreover, several other Florida cities had explosive growth in rent prices, including Aventura, Coral Gables, Delray Beach, Doral, Fort Lauderdale, Hialeah, West Palm Beach, Tampa and Orlando.

When taking area wages into account, rent affordability decreased as much as 21.7% in a place like Boise, ID, in 2021, compared with 2017, according to Online Mortgage Advisor, which compared the percentage of income required to pay the rent. For Boise, that percentage went from 29% to 51%.

But Parsons said affordability isn’t at the core of the crisis. Rather, he said, “For market-rate rentals, there’s a tidal wave of pent-up demand that far exceeds available supply. That’s driven vacancy to the lowest levels on record, and driven up rents by 10% or more in many places. But incomes are keeping up with rents (on average) in this segment of the market, keeping rent-to-income ratios in the low 20% range.”

While people are generally paying rent at near-normal levels, Parsons said the increase in demand for higher-end rentals has squeezed out lower-income renters.

“These are generally people who couldn’t afford market-rate rentals even prior to COVID,” he said. “The pandemic did not change the story but it put a spotlight on a decades-only problem: There’s a severe shortage of government-subsidized affordable housing in the U.S. Governments at every level – from cities to states to the U.S. Congress – have underfunded affordable housing for decades, and unfortunately we’re now seeing the result of that.”

Where is Rent Cheaper?

Of the nation’s 50 most-populous metro areas, only Milwaukee and Kansas City, MO, saw rent decreases of 3% and 2% respectively, in Redfin’s report, while Rent.com noted decreases in Toledo, OH, Madison, WI, Indianapolis, IN, and Atlanta, among others. According to Zumper’s report, median rent for a one-bedroom is lowest in several cities in Kansas, Texas, Kentucky, Louisiana and Ohio. It gives the lowest median rents for:

  1. Wichita, KS at $650
  2. Akron, OH at $680
  3. Lubbock, TX at $690
  4. Shreveport, LA at $730
  5. Lexington, KY at $800

That a New York City apartment costs five times (on average) what one does in Wichita might seem crazy (though perhaps not to New Yorkers). But rent is increasing in the low-cost places, as well, albeit not as drastically as in other locations. It went up 8.3% in Wichita, compared to last year, for example, 13.3% in Akron and 6.2% in Lubbock. The places where Zumper reports median rents for one bedrooms dropped the most in the past year are:

  1. Milwaukee fell 22.1% to $950
  2. Newark, NJ fell 13% to $1,340
  3. Cincinnati fell 10.3% to $870
  4. Richmond, VA, fell 10% to $1,170
  5. Durham, NC, fell 7.7% to 1,200

But your experience may differ. Bryan Moorefield, director of research and policy at Housing Opportunities Made Equal of Virginia, a fair housing organization, says he lives in Richmond and the local news reporting there is that rents are increasing, which reflects what he’s seen in the area. To further complicate the picture, Rent.com says median rents in Richmond decreased 3.4% since last year, but went up 8.6% on a per-square-foot basis. And even Zumper’s data show Richmond rents increased 2.6% in the last month.

What Are Your Options When Your Rent Increases?

The first thing you should do when facing a rent increase is to research local rules and regulations that apply, Spotser said.

One place to start is on the website of the National Multifamily Housing Council, which has information about rent-control laws by state. Generally, you’re probably out of luck, though. According to the National Apartment Association, 36 states have laws that prevent or restrict local cities and counties from enacting rent control.

Rent Control and Other Laws for Tenants

States with rent control include:

  • New York
  • California 
  • Oregon
  • District of Columbia

In addition, some cities and towns in California, Minnesota, New Jersey, and Maryland have enacted their own rent-control laws. If you live in one of those places, research the law and make sure your increase is in compliance.

The current explosion in rents has also reignited the conversation around the country, prompting some new rent-control laws and debates in other places about whether tenants should receive some legal protection from unaffordable increases. Those protections include notice requirements, limits on increases and even relocation assistance.

Recently enacted laws include:

  • Miami recently passed a law requiring landlords to give tenants at least 60 days notice for rent increases of more than 5%. 
  • Landlords in Portland may be required to help tenants pay relocation costs if their rent increases significantly. 
  • The state of Oregon imposed statewide rent control in 2019, with limits calculated each year. In 2022, the maximum allowed rent increase is 9.9%. However, the law applies only to homes that are at least 15 years old. This is to encourage construction of new units.
  • Seattle landlords are required to give 180 days notice of rent increase. Most of the rest of Washington is required to give 60 days notice. 
  • St. Paul recently imposed rent control limiting increases to 3% a year, effective in May.
  • Santa Ana, CA, effective November 2021, limits rent increases to 3% or 80% of the consumer price index for rental units built before Feb. 1, 1995 and many mobile homes in mobile home parks established before 1990.  This goes further than the statewide rent increase limit at 5% plus local inflation.

 

What to Do When the Law Doesn’t Help

If your jurisdiction doesn’t have any legal protections, “then the situation becomes a little tougher,” Spotser said.

Can You Get Rental Assistance?

Before moving to your next step, check to see what resources might be available to help you pay your rent. If you qualify, financial aid might be an option. You can look on the website of the Consumer Financial Protection Bureau for rental assistance programs in your area.

Moorefield, of Housing Opportunities Made Equal of Virginia, said if you’re low income, you could also contact a fair housing organization like his, which makes available counselors to help people navigate the rental market. If you feel you may have been discriminated against, you could reach out to either a non-profit fair housing organization or HUD or state fair housing agency.

Beyond that, you’re left with two categories of options: Negotiate with your landlord or move.

How to Negotiate With Your Landlord

The CFPB warns tenants not to overpromise and not to agree to paying rent they can’t afford. Falling behind in rent can destroy trust and make tenants unattractive to keep.

Jeff Andrews, senior market analyst at Zumper.com, offered several suggestions for effective negotiations. It’s best, Andrews noted, if your landlord wants to keep you.

To be more attractive to a landlord, Andrews said, make sure you’re “respectful, professional and punctual” in all interactions with the landlord or leasing agent, which can show “you’re a responsible tenant who will not only pay rent and bills on time, but also take care of the place.”

If you’re a good tenant, your landlord is more likely to be motivated to keep you, rather than having to go through the expense of finding and screening another tenant who may not be as easy as you.

Having established yourself as a good tenant, there are other ways to appeal to the landlord and make yourself valuable in ways that might inspire a willingness to negotiate your rent. 

Andrews advises negotiating before your lease expires, so you don’t have to negotiate from a place of desperation. Given today’s environment, it’s probably a given that you’re going to need to negotiate. Don’t wait for the landlord to spring a rent increase on you.

“Try negotiating a few months prior to your move-out date,” Andrews said. “It is always in the resident’s favor to be proactive. Depending on the management company, renewal notices are sent out 30-60 days prior to the end of a lease term. So residents should begin negotiations 90-100 days in advance of their new lease if they plan to negotiate.”

Also, Andrews suggested trying to negotiate during a slow time of year for the landlord. “Winter is usually a quieter time for landlords,” he said. “If you try to swing a deal during the summer moving rush, your request may fall on deaf ears.”

If your landlord notifies you your rent is increasing, don’t necessarily assume the amount is set in stone. “Your property manager operates as a business,” Andrews said, “and they’re going to want to find a balance of happiness for their client and themselves.”

To prepare yourself to respond to your new rent amount, you should research the market in your area to see what other rental properties are fetching. Zumper has a national rent report with data, including trends and rents in particular markets. You can also search Zumper and other real estate sites like Zillow, Redfin and Rent.com for rent pricing in your area and get examples of places charging lower amounts than your landlord is quoting.

You should know, though, that as much as your landlord may know it’s better if they can keep you, they also know it’s better for you if you don’t have to go to the expense of moving. And some landlords will provide for you a sheet with information about moving and budgeting costs to drive that fact home.

Rent Negotiation Strategies 

Among the options the CFPB suggests as negotiating points is adjusting the date your rent is due. If the day better aligns with your payday or is split into multiple payments over the month, it might make it easier to pay.

If you’ve fallen behind, see if your landlord will agree to a repayment plan, giving you a period of time to catch up.

If your landlord tries to charge you the same as they would charge a new tenant, you might want to see if they could offer a discount for the fact that you’re renewing. “Most property managers routinely discount renewals relative to a new lease rent for a variety of reasons,” said Parsons at RealPage. “Renewals give property managers certainty. When a lease is renewed, the property manager saves on ’turn costs’ – cleaning, paint, carpet, then marketing the unit to new prospective renters. Plus, renewals prevent down time when no rent is coming in between leases.”

Andrews offered the following additional strategies for negotiating your rent:

  • If you can swing it, offer to prepay for several months at once. A lot of landlords, Andrews said, “would be thrilled to not have to worry about chasing late rent payments. If you can pay a few months upfront, your property manager or owner might be willing to offer you a monthly discount.”
  • If you can, agree to committing to a longer lease. “If you plan on being in your location for a while, this could be a big negotiating factor,” Andrews said. “If the lease in question is for 12 months, ask if they’d be willing to drop the monthly rate in return for signing an 18-month or 2-year lease. Not having to find new renters every 12 months is a good reason to give someone a lower monthly rent price.”
  • If you don’t have a pet in a place that allows pets, point that out. “Cleaning a unit after a pet-owning resident moves out can cost your property manager or owner extra time and money,” Andrews said. “If you don’t have a pet, see if you can use that as a bargaining chip.”
  • Offer to give up a parking spot. “If you don’t have a car or don’t anticipate having many guests with cars, this may be something to offer your property manager. They can offer the extra spot to another renter and offer you a discount in return.”

Moving Might Be a Last Resort

If you have the option through your job to work remotely, you could research whether it would be worthwhile to move to a lower-cost area, noted Caitlin Sugrue Walter, vice president of research at the National Multifamily Housing Council, This option may not be available, however, for those hit hardest by rent increases — those who are paid lower and are usually required to report to work in person.

Before deciding to move, you should also understand that rent increases for existing leases are typically lower than for new tenants. And the reason you’re facing a rent increase is the market supply is limited. So your options for a new place may not be so good.

Finding the Best Deal if You Have to Move

That said, if you fail to negotiate a rent you can afford, you may have to move. Preparing for this outcome is another solid reason for negotiating your rent price well in advance. Having more time to find a new place and move will increase your chances of success.

If you have to move, Parsons said flexibility on your part could make a difference in finding something you can afford. “If you’re insistent on moving into a particular floorplan in a particular property and with particular move-in/move-out dates, you’re highly unlikely to find a good deal,” Parsons said. “Some renters try to play hardball and negotiate, but might not know rentals are very different from for-sale homes.”

Property managers must tread lightly in negotiating rent differences for different tenants, Parsons said, so as not to run afoul of federal and state fair housing laws that prohibit discrimination. But tenants can ask owners of multi-unit properties for the best-priced floor plans, Parsons said.

He added, “And one under-the-radar strategy: Ask about move-in and move-out dates. Maybe there’s a unit coming available in six weeks, and locking in early might be a better deal. Also, property managers worry about what they call ’exposure’ or ’lease expiration management.’ It means they want to balance out their lease expirations across the year, with the bulk coming up during the spring and summer months when demand is strongest. Savvy renters can use that in their favor. In some cases, you’ll find a lower rent if you’re willing to take on a non-traditional lease term that benefits the property managers. Usually that will mean accepting a longer-term lease, but in some cases it could also mean shorter leases in the 8-11 month range.”

Will this Rent Crisis Ever End?

In order to address the issue, the Consumer Federation of America’s Spotser said the nation needs a “concentrated effort to look at federal and state housing policy to implement changes” to find ways to increase rent subsidies and increase housing construction. On a local level, communities, she said, communities need to examine zoning laws that limit multifamily housing construction.

Parsons said the best cures for what ails the rental market are increases in supply, particularly of affordable housing, and direct subsidies to renters. Both of those solutions “directly benefit those who most need the benefits, and without the side effects of rent control. But both are grossly underfunded unfortunately.” Still he noted that apartment construction is at a near 40-year high, which he said is “an ideal remedy for a market starved for available housing.”

 

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