Prarie1 commented on my post about housing and rent. He said:
Who would pay that much in rent??? That’s almost double my mortgage for 10 acres with a house and shop.
The explanation? Inflation, the eviction moratorium, investors, and escape from New York. All four of these things are driving an incredible increase in housing prices: both sales and rentals.
- First, inflation. The dollar is simply worth less because you had the government shoveling cash into the economy with a metaphorical front end loader. More cash chasing the available housing means your housing dollar doesn’t go as far.
- Next, the eviction moratorium. Being a landlord now carries significantly more risk than it did before the year and a half that landlords were forced to allow tenants to live in rental properties for free. Many landlords dropped out of the business. The ones who stayed began to raise rents in order to recoup losses caused by the moratorium.
- Then there is the escape from New York (and other restrictive states). After being locked down for months, many people from more restrictive, northern states have figured out that, since they can work remotely, Florida is a great place to buy a second (or even third) home. Taxes are low, housing is relatively cheap, so they are buying up property like you wouldn’t believe. This has the effect of reducing supply, and driving up prices, mostly because they are paying too much for houses without even realizing it, because they still think it’s a bargain when compared to NY prices.
- Then there are the investors. These are large companies who are watching the prices of real estate skyrocket and are buying up entire neighborhoods.
All of these factors are driving prices up to unbelievable levels. I was shocked in October when I did a review of area rental rates so I could adjust my rates for 2022. The average rental price had increased from about $1600 per month to around $2500 per month in just a year’s time. That’s a 56% increase in just a year’s time.
This nurse here in Miami saw a 40% increase in rent in one year’s time, and Miami’s rents were already high, meaning that they didn’t increase as much as some other areas in the state, such as Tampa or Orlando. Here are the cities with the largest growth in rent in the past 12 months, according to ApartmentsList:
- New York City, N.Y. – 33.5% rent growth
- Tampa, Fla. – 31.4% rent growth
- Scottsdale, Ariz. – 31.1% rent growth
- Orlando, Fla. – 30.1% rent growth
- Mesa, Ariz. – 29.5% rent growth
- St. Petersburg, Fla. – 29.3% rent growth
- Irvine, Calif. – 28% rent growth
- Phoenix, Ariz. – 27.9% rent growth
- Glendale, Ariz. – 27.5% rent growth
- Las Vegas, Nev. – 27.4% rent growth
If rents continue to increase at a rate of 32 percent per year, you can expect rents to double roughly every two years. (a $1,000 rent becomes $1,320 in one year, then becomes $1,745 at the end of year two) This is exactly what is happening.
Buying a house was similar. There are houses in the area that sold for $235,000 in 2019 and just sold again in 2021 for $325,000. The price of the house increased by 38 percent in less than two years.
So if a rent seems unreasonable, that’s because our real estate market is being warped and stretched by government interference. That is having the effect of driving up prices. So what do governments do? Interfere in the market some more, that’s what. Look at what the UK is doing:
Private landlords in the UK will be forced by law to bring their properties up to a set of national standards. Landlords will need a license. If a property fails to meet standards for maintenance, energy efficiency, and a minimum standard for fixtures and fittings, the landlord loses his license. Nearly one in five families in the UK are renters. What do you think this will do to rental prices in the UK when landlords are forced to lay out a large amount of money to meet the new, more stringent standards?
Expect to see a push for this here in the US.