Amid a historic run of inflation over the last year, the cost of housing—especially rent—has been one of the most significant pressures on household finances. Renters in many markets are seeing increases of 20% or more as they sign new leases, and with the nationwide rental vacancy rate at just 5.6%, renters have few alternatives to find more affordable options.
The current state of the rental market is a product of both supply and demand, with issues compiling over time and being exacerbated since the pandemic began. On the supply side, the U.S. has an estimated shortage of nearly 4 million housing units. Zoning and density restrictions have made it more difficult to add housing stock in many locations, both for rentals and in the real estate market. With rising real estate prices, 70% of the growth of the rental market since 2009 has come from higher-income earners who might otherwise have bought a home. And as more high earners enter or stay in the rental market, builders and developers are incentivized to provide more luxury units, which means less new stock to meet the needs of low- and middle-income earners.
The COVID-era economy has worsened all of these issues. The spike in home values and now rising interest rates are putting homeownership further out of reach for many would-be buyers, keeping more people in the rental market. Builders and developers are also struggling to keep up with heightened demand while managing costs. Ongoing supply chain challenges have made it more time-consuming and expensive to obtain building materials, while the tight labor market has left hundreds of thousands construction positions unfilled.
The last year has seen a dramatic spike in rental prices as a result of these factors, with a 17% year-over-year increase in rental costs from February 2021 to February 2022, according to data from Zillow. In comparison, the typical year-over-year increase has held steady between 3% and 5% for most of the last decade. And recent increases stand in stark contrast to the first year of the pandemic, when increases fell to less than 1% as landlords and renters navigated the economic uncertainty of the pandemic, and federal and state governments implemented rental assistance programs and eviction moratoriums to stabilize the market.
No segment of the rental market has been spared the cost of rising rents, from singles or couples in a studio or one-bedroom unit to families renting a three- or four-bedroom home. According to data from the U.S. Department of Housing and Urban Development, units of all sizes saw price increases of greater than 10% for the median unit between 2019 and 2022.
The impact of rental price increases has varied somewhat by geography. Many states in the southern and central U.S. have seen lower levels of increase, and one state—Alaska—has actually seen a 3% decrease in rental costs since 2019. The locations that have seen the greatest rent increases are all found in the western U.S., led by Nevada (26.0%), Idaho (24.1%), and Utah (22.2%). These states have experienced high population growth in recent years, bolstered in part by workers leaving higher-cost states like California and Washington in search of more affordable markets—but who have increased costs in their new locations in the process. A similar pattern is apparent at the local level. The metros that have seen the fastest increases in rental costs are “second-tier cities” like Sacramento, Las Vegas, Phoenix, and Salt Lake City that have been booming with incoming residents seeking more affordable locations.
The data used in this analysis is from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. To determine the locations where rents have risen the most, researchers at Stessa calculated the percentage change in median rent from 2019 to 2022. In the event of a tie, the location with the higher total change in median rent from 2019 to 2022 was ranked higher.
The analysis found that median rent in Utah is now $1,361, compared to $1,114 in 2019—an increase of 22.2%. Out of all U.S. states, Utah experienced the 3rd largest rent increases. Here is a summary of the data for Utah:
- Percentage change in median rent (2019-2022): +22.2%
- Total change in median rent (2019-2022): +$247
- Median rent (2022): $1,361
- Median rent (2019): $1,114
For reference, here are the statistics for the entire United States:
- Percentage change in median rent (2019-2022): +12.5%
- Total change in median rent (2019-2022): +$161
- Median rent (2022): $1,445
- Median rent (2019): $1,284
For more information, a detailed methodology, and complete results, you can find the original report on Stessa’s website: https://www.stessa.com/blog/cities-where-rents-have-risen-most/