COVID pandemic brings major increases in Georgia rental rates
ATLANTA - The COVID-19 pandemic has had a major impact on the cost of rent, both here in Georgia and nationwide. Rental rates across the country seem to have followed home sale prices — the average cost for a one-bedroom apartment has gone up 16% nationwide just since January.
FOX 5 real estate expert John Adams says the stories about rental rates being raised to new levels, which is making it hard for some renters to afford anything at all, are accurate.
A recent study focused on data from a website called Apartment List found that the average cost for a one-bedroom apartment has gone up 16% nationwide since January.
And the trend is across the board, although the rate of increase varies.
It’s a lot like groceries or gasoline. When it costs $100 to fill up your tank with gas, you don’t have much choice in the matter. The big difference is that gas prices change about once a week, while your rent is usually locked in for a year or more.
And the spike in rental rates is worse outside metro Atlanta than in.
Statewide since January of this year, renters have seen the cost of a one-bedroom apartment jump 22%, while renters in the metro Atlanta area have had to endure only an average increase of 19%.
The pandemic related increase in rental rates seems to have a variety of causes, but Adams has narrowed it down to four root causes.
(Mary Stringini)
1. Supply & Demand
Part of it is simply a "supply and demand" problem dating back to the Great Recession. After the housing crash, we didn't build enough new housing to meet demand, and that prevented existing owners from converting their existing homes to rental by moving into a new home. And new rental construction is so expensive that it enters at the top of the rental market, where it is least needed.
2. Pool of Rental Housing Declines
We have about 44 million rental units in the US today, and about half of those are owned by "Mom & Pop" landlords - owning 10 units or less - as retirement investments. During the pandemic, these landlords saw sale prices soar while many of their own tenants stopped paying rent altogether. So a lot of folks named "Mom & Pop" decided this might be a very good time to sell their nest egg, and they did. This hurt supply and only made the problem worse.
3. Government Regulations
The road to Hell is paved with good intentions, and policies like housing-choice vouchers, affordable housing mandates, rent control, height regulations, historic designations, and protective zoning laws have added substantially to the cost of new construction, making housing at all levels more expensive.
A recent study found that government regulations accounted for nearly 24% of the cost of new residential construction, particularly in entry-level housing, which tended to reinforce the decision to rent, adding to the demand side.
4. Soaring "For Sale" prices
Rental demand is soaring due to the very high prices in the for-sale market, which are up nearly 20% year-over-year. In certain markets of Atlanta, owner-occupant homebuyers are being pushed out by all-cash investors who seek no inspection. It’s really hard to compete with all cash buyers. Discouraged prospective buyers decide to give up owning (for now) and simply rent.
The bottoms line is the recent increases in both selling prices and rental rates of homes are simply unsustainable. These increases will eventually slow down. But Adams sees no evidence of a housing crash in the foreseeable future, and I expect 2022 to be, at the very least, a strong year for housing, both in sales and in rentals.
If you are waiting for prices to come down, don’t hold your breath.