Rent increases are Approaching Unaffordable Levels for Most Residents
In a recent study, many cities across the country are seeing rent increases approaching unaffordable levels for most residents (unaffordability is defined when residents are paying more than 30 percent of income for housing).
On average, US cities are seeing 4.6% rent increase in 2015, continuing a six years growth trend. According to Axiometrics, Portland Oregon experienced the highest rate increase in 2015 at 12%.
There is also a shortage in supply because developers slowed the pace of construction after the real estate bubble crash of 2008. Effectively reducing the number of residences as population grew by 10 million since. 4 million new residential units have become available since 2010, however it is not nearly enough to satisfy the demand.
Public policies have also been ineffective in making housing more affordable. In San Francisco, a city with one of the most stringent rent control regulation, rental rates on a one-bedroom apartment is now averaging $3,500 per month according to real estate website Zumper. Critics of rent control policies have argued that rent control reduces the quantity and quality of housing available. Rent control policies can cause a shortage in the market to new residents and in return drive up the market price.
With first-time homebuyers hitting a record low last year and the rental market saturated, this might be great news to apartment owners who are currently experiencing the increase in property value as well as rent increases.