Increasing rent remains a pressing issue facing tenants across the country. Over the past year (ending in May) rent increased an average of 3.6%. This is down a measly .2% from the previous year. The slight downtick is attributed to developers finishing up buildings that have been constructed over the last few years. Makes you wonder how many apartments need to be built to bring it down an entire percent.
To make the issue worse, wages have increased at a much slower pace – 2.7%. This disparity is making it difficult for residents of larger cities to remain where they are. The average cost of rent right now for a studio apartment is $1,059 – which is no small fee. And this is below market for many areas in the county. No surprise that New York comes in at a towering $2,640 per month average. Mississippi, on the other hand, lets you rent at a leisurely $759 per month. At Ali Safavi Real Estate we often talk about mobility. If you are willing and able to move, sometimes only a few towns away, you can find better rent and better home prices.
If you are a landlord, rising prices is typically a good thing. It means more cash in your pockets. However, if rents continue to rise without wages to match, there could be a slew of unintended consequences. Our diverse cities could be split in two, pushing the middle class further to the outskirts – leaving only the wealthy to remain where they are. We’re already seeing this in places like LA and New York. Areas that were once “affordable” are now featuring rent of over $2,200 per month.
Even if you don’t care about a divided city, as a landlord you want your tenants to pay – and pay on time. With rising rents, tenants could find themselves having a harder time making ends meet. Should they just move? Have you ever tried moving and not spending hundreds or thousands of dollars? Transferring homes is a pricey endeavor. Do we then push them to the streets? It’s a slippery slope. We should be cheering on the middle class – finding ways to get more affordable housing for everyone. It’s actually good for business. The more people who can afford the rent, the more choices you’ll have when it comes to picking the perfect tenant.
Los Angeles is looking at tackling this problem by increasing the number of apartments that fall under rent control. On one side you have tenants who love the idea and landlords who hate it. Proposition 10, which will be on the ballot in November, would repeal the Costa-Hawkins Rental House Act, thus allowing local governments to adopt laws and regulations to govern how much landlords can charge tenants for renting apartments and houses. Right now, it is illegal for cities to apply rent caps to any properties built after 1995, when it was passed — or earlier. Supporters say this will protect residents from being displaces by giving more powers to local government to fix housing problems. Opponants say it could actually perpetuate the housing crisis by disincentivizing the construction of new homes. Though do rents have to be as high as they are for investors to make back their money? This is a much larger argument with a lot to say on both sides. I’d love to hear from you! Have you seen rising rents affect your buildings in a positive or negative way?