WASHINGTON – U.S. home rental prices continued to climb at a modest pace in December, but rapidly escalating costs in cities such as San Francisco and Denver suggest that apartment dwellers are facing more financial pressure.
Prices rose 3.3 per cent in December compared with 12 months earlier, real estate data firm Zillow said Friday. Although that increase is less than the recent appreciation in home values, a surge in apartment costs in several of the hottest markets indicates that renters who aspire to buy homes face mounting financial challenges.
The share of Americans who own their homes has slipped to 64.4 per cent from a peak of 69.2 per cent in 2004, the result of the housing market crash that triggered the Great Recession in late 2007 from which the U.S. economy is still recovering more than seven years later. Because fewer Americans can afford to buy a home, demand for apartments and rental houses has pushed up prices at a time when newly graduated millennials are starting to leave their parents’ homes.
“We do not have the affordable rental housing resources to meet” the demand, said Barry Zigas, director of housing policy at the Consumer Federation of America, at an industry conference this week.
Rental prices have risen 52 per cent since 2000, while incomes for renters have only increased 25 per cent, said Stan Humphries, chief economist at Zillow. The higher costs make it difficult for renters to save for a down payment, which then causes them to rent for a longer period of time and delay any potential home purchases.
“You don’t have to be a housing economist to see that there is a problem there,” Humphries said.
Additional construction has yet to significantly limit price growth nationwide. Builders broke ground on 376,000 apartment complexes last year, a 10.2 per cent increase from 2013, the Commerce Department reported Wednesday. By contrast, single-family house construction rose just 1.4 per cent last year.
Rents jumped 15.4 per cent in the San Francisco area to a median monthly cost of $3,031, an increased mirrored by San Jose where prices were up 14.5 per cent to $3,187 a month. Rents climbed 10.5 per cent in Denver to $1,817 a month. Kansas City also notched a substantial 8.5 per cent gain to $1,204 a month.
Still, tenants are catching a break elsewhere. In Chicago, Minneapolis, Philadelphia, Baltimore and Washington, DC, rents rose by less than 2.2 per cent. Rents in Minnesota’s Twin Cities area ticked up a mere 0.1 per cent this past year to $1,501.