The pace of rent inflation is on the rise
The federal government's key cost of living measurement says the Bay Area's pace of rent inflation increased for the first time in six years while renters in California and across the nation are seeing jumps not seen in decades.
My trusty spreadsheet analyzed the lengthy history of the “rent of primary residence” slice of the inflation-tracking consumer price index for three big California metropolitan areas and the nation. The key metric? How fast rent inflation changed in a year's time.
The CPI's extended track record for rent allows us to put rising housing expenses into a long-term perspective.
The San Francisco metro's rent increases during 2022's first four months were not historically noteworthy but they did mark the first time hikes increased after five years of shrinking rents.
Nationally, rent inflation's one-year jump was the largest since 1948. And elsewhere in California, San Diego's rent spurt was last bigger back in 1968. And Los Angeles and Orange counties haven't seen a rent hike surge like early 2022's since 1980.
Details
San Francisco rents have stagnated as many residents chose to live elsewhere before and during the pandemic.
As 2022 started, the CPI says Bay Area consumers were paying just 0.33% more for rent. Rents rose at an 0.1% rate in 2021 — the fifth dip from 6.8% rent inflation in 2016.
In Los Angeles and Orange counties, the CPI says the cost of renting in 2022's first four months was up 3.4% in a year. In 2021, rent inflation ran at 1.2%.
That 2.2 percentage jump in the pace of rent hikes — if it continues the rest of the year — would be the biggest surge in 42 years.
Nationally, consumers are paying 4.3% more for rent this year — that's 2.1 percentage points higher than last year's 2.2% hike.
In San Diego, consumers are paying 5.1% more for rent this year — a 2.9 percentagepoint uptick versus last year's 2.2% rent inflation pace.
Bottom line
These are significant hits to consumer wallets caused, in part, by what we've seen across the economy: “Too much good stuff.”
The finances of many renters continued to improve this year as the pandemic economy's surprisingly robust recovery meant more folks could afford to move out of crowded situations or pay up for an
apartment.
Remember, the CPI rent index is a slow-moving metric reflecting what a broad base of consumers is paying landlords in all kinds of living arrangements.
These leaps in rent inflation strongly suggest housing costs will be an even bigger financial headache for many folks — if not the entire economy — for the foreseeable future.