Rent Prices Across US Fall for First Time Since June 2020

A 'For Rent, For Sale' sign outside of a home in Washington, on July 7, 2022. (Sarah Silbiger/Reuters)

Asking rents in zero- to three-bedroom apartments declined for the first time in more than four years due to the large supply built up over the past years, according to real estate brokerage Redfin.

The median asking rent for zero- to one-bedroom apartments fell 0.1 percent, two-bedroom by 0.3 percent, and three-bedroom-plus by 2.4 percent in July year over year, according to an Aug. 13 news release. All three apartment categories were down by at least $50 a month from their highs seen over the last couple of years. This is the first time since June 2020 that there has been a year-over-year decline in rent prices across all bedroom counts.

Rent prices for zero-, one-, and two-bedroom apartments mostly remained steady due to higher demand in these categories, Redfin noted, despite higher supply hitting the market. Three-bedroom-plus apartments saw a bigger decline compared to the other two categories as the increased supply led to prices falling faster due to lower demand for such units.

“Rents have recently steadied—or even dropped slightly—because of the sheer number of apartments built over the past two years,” said Redfin senior economist Sheharyar Bokhari.

“Construction is slowing down, and prices will eventually start rising again, but now is still a good time for renters to find a deal, especially families looking for an apartment with at least three bedrooms.”

Metropolitan areas in Florida and Texas were found to have recorded the largest decline in rent prices. These two states built a high number of new apartments since the COVID-19 pandemic, Redfin said.

Austin, Texas, saw the largest fall in rental prices, with a decline of 16.9 percent from the previous year. Jacksonville, Florida, registered a 14.3 percent decline. San Diego, San Francisco, and Tampa made up the next three cities with the biggest year-over-year decrease in rental prices.

Even though rents declined across all bedroom types, the combined rent of all units actually rose by 0.4 percent in July from last year. This discrepancy is known as Simpson’s Paradox when a trend visible among subgroups disappears or reverses when the subgroups are combined into a single group.

Compared to the pre-pandemic period, rental prices continue to remain high. According to data from real estate marketplace Zillow, rents have risen by nearly 33 percent since the beginning of the pandemic, with a typical U.S. rent at $2,054 in June.

The median household was found to be spending 30 percent of their income on a typical rental, up from 28.4 percent pre-pandemic.

Rent Control

The easing down in rental values across various apartment types comes as the Biden administration announced last month that it plans on limiting rent increases.

According to the proposal, corporate landlords will only be able to make faster depreciation write-offs on rental housing properties if they restrict annual rent hikes to less than 5 percent.

“This would apply to landlords with over 50 units in their portfolio, covering more than 20 million units across the country,” the White House said.

“The administration looks forward to working with Congress to ensure renters are protected and corporate landlords comply with the intent of this proposal.”

Experts are apprehensive about proposals like restricting rent increases. “If their intent is to lower rents, then you should be doing whatever you can to make it a more favorable economic environment to attract more investment to build more supply,” Matthew Paletz, a landlord advocate, told The Epoch Times.

Imposing rent control could lead to a reduction in the number of available apartments since it discourages landlord groups from building new units.

In an interview with The Epoch Times last year, Alexandra Alvarado, director of education for the 145,000-member American Apartment Owners Association (AAOA), said that rent control has actually made some of her members push up rates.

“We have members who had very rarely raised rents, but who are now raising them to the [rent control] cap each year so they don’t fall behind,” she said.

“They’re never going to skip a year. It’s contradictory, but I think for our members, there have actually been more rent increases since rent control.”

Mark Gilman contributed to this report.