As Americans pay more for rent, landlords get relief

LOS ANGELES — Americans are paying more to live in apartments, as demand for housing increases and many would-be homebuyers are forced to rent because prices for houses have gotten too steep.

It’s a boon for owners of big apartment communities more than a year after the economy fell into a recession that left millions of Americans unemployed and struggling to pay rent. Zillow, which tracks housing data, says its rent index rose 7.1% in June, the biggest year-over-year increase going back to 2015.

Government efforts to support Americans hurt financially by COVID-19, including relief payments, have almost certainly helped tenants keep up with their rent. At least one measure of rent collections shows fewer tenants are failing to keep up with payments than just a few months ago. And while apartment vacancies haven’t fallen back to pre-pandemic levels, they’re basically in line with the 10-year average.

Rising apartment rents represent a shift from earlier this year, when they weren’t growing and vacancies kept rising. That changed in the spring when pandemic-related restrictions were loosened following a ramped-up distribution of coronavirus vaccines. Since then, an improving economy and job market have helped stoke demand for rental housing.

“The tide has really turned quite a bit for (apartment) rentals because of these factors,” said Victor Calanog, chief economist at Moody’s Analytics REIS.

The national average effective rent, a key industry measure, increased by 0.6% in the second quarter, according to data from Moody’s Analytics REIS, which tracks owners of communities with at least 50 apartments. The Apriljune increase snapped a string of four straight quarterly declines, lifting the average U.S. effective rent to $1,394.79. It was also the biggest since the third quarter of 2019. Effective rent is what’s left after taking out concessions offered sometimes by landlords to woo tenants.

Figures from Zillow, which tracks a wide swath of rental properties, including those owned by individual investors, show typical rents rose to $1,799 in June.

Freddie Mac projects U.S. apartment rents will rise 2.5% this year, while the vacancy rate slips to 5%.

With demand picking up, landlords are feeling less pressure to offer tenants incentives such as a free month’s rent, Calanog said.

“You could have gotten that six months ago, but no more,” he said.