Since the Great Recession, the number of people renting has been on the rise. According to the U.S. Census Bureau, the share of households that rent increased to 35.4 percent from 34.1 percent between 2009 and 2011.
Prior to the housing market crisis, the focus was more on single-family homes, usually destined for purchase, than on building more rentals. That meant that builders weren’t creating new apartment units for renters. When the crisis hit, and foreclosures spiked, there was a demand for rentals that couldn’t be met with supply. As a result, rents began to rise.
Where are Rents Rising?
On average, rent has been on the rise throughout the United States. However, as one might expect, rents are rising at a faster pace in major metropolitan areas. “Here in New York [City], the average rent right now is up about 2 percent over last year, to $3,800 per month,” says Phil Lang, the co-founder of Suitey, a software-powered real estate brokerage. “This is up significantly from several years ago when the average rent was closer to $3,400 per month.”
Another market that has seen an increase in average rental rates is Chicago. “Rent prices have steadily increased over the last several years, with the biggest jump in pricing between 2011 and 2013,” says Aaron Galvin, the managing broker at Luxury Living Chicago Realty. “Prices went up as much as 25 percent.” He points out that prices can get even higher when you try to rent downtown. “Rents right downtown can be 20 to 30 percent higher than in locations just a few miles away.”
On the West Coast, San Francisco has seen an upsurge in rental costs — and the “City by the Bay” remains one of the priciest places to rent in all the United States. “In San Francisco alone, desirable locations have doubled in rent since 2010,” says Nicole Wright, the CEO of Write Financials Entrepreneurs Loft.
Real estate research firm Reis bears out these anecdotes in its report for the fourth quarter of 2013. The report says that rents rose 3.2 percent during 2013. But the end of the year, the average rent charged was $1,083 per month. Nationwide, rents have been on the rise, but it appears that the rate of the rise might be slowing.
According to the Reis report, the increase in rent is slowing. During the third quarter of 2013, rent rose by 1 percent. However, the rise had slowed to 0.8 percent in the fourth quarter. There are indications that rent prices might not continue the recent trend. With 127,000 rental units built during 2013, the supply crunch is easing a bit. With supply starting to meet demand, landlords are unlikely to be able to keep raising rates at the same pace.
“So far this year, pricing has leveled off,” says Galvin. “We expect to see little to no increase over the next couple of years. This seems to be the trend nationwide as more rental properties are being built.”
That doesn’t mean that you’re going to see lower rents if the landlord finds someone willing to pay a higher rate. “If they can get more, they’ll charge more,” says Wright.
Keeping Your Rent Lower
The Census Bureau report considers rental costs “high” if a household spends at least 35 percent of its income on gross rent. Between 2009 and 2011 renters paying high costs paid more, seeing a rise to 44.3 percent from 42.5 percent.
While not everyone is in this category, it does underscore the reality that a significant portion of your household income is likely to go toward housing costs. In 2011, the average American spent 33.8 percent on housing, according to the U.S. Labor Department. That’s really not too far off the percentage of income high rent payers spend.
If you want to keep your rent a bit lower, you need to be active in your approach. Rule number one is to look at location. “Move to another neighborhood in search of lower rents,” suggests Lang. “In the New York City area, this is what has driving the development of Brooklyn in the last decade.”
Lang also advises downgrading your expectations if you want to save money on your monthly housing costs. “Move to a similar apartment in a building with few amenities,” he says. “Eschew a doorman for a walkup, for example.”
Wright also has her own advice on reducing how much you pay in rent. “If rental control is an option, choose an apartment that qualifies,” she says. Wright also suggests that you do market research. “Find out what other rentals in the area are going for. Find out the high, medium, and low ranges.” One resource you can use to learn about your rental market is the FY 2014 Fair Market Rental report for your area from the Department of Housing and Urban Development.
Finally, both Lang and Wright suggest that you attempt to negotiate. Lang says that you can always ask for a better rate, and Write points out that “the person renting to you is just another human being…life is a conversation.”
However, don’t get so hung up on a cheaper price that you neglect other aspects of the rental. In some cases, it might not be worth it to move if the savings are relatively small. “Given the cost of moving, it is often not worth it to save just $200 per month,” says Lang.