Inflation continues to ravage America's paychecks, and it's increasingly showing up in rising rents.
The latest Consumer Price Index (CPI) by the Bureau of Labor Statistics (BLS) shows that prices ticked up by 0.1 percent for urban consumers in August, for an annualized increase of 8.3 percent for the year. The marginal increase in inflation comes in spite of fuel costs falling 10.3 percent last month.
"Increases in the shelter, food, and medical care indexes were the largest of many contributors to the broad-based monthly all items increase," said the BLS in its news release today. The latest CPI numbers show a 0.7 percent increase in shelter costs in August and 6.2 percent over the past year.
The BLS measures both cash rents paid by tenants and something called Owners' Equivalent Rent—a measurement of how much an owner-occupied home could be rented for. The bureau doesn't include home prices in the CPI.
Spot rents reported by listing companies are growing at an even faster rate. Apartment List reports a 7.2 percent increase in rental prices so far this year. That's moderate compared to the 17.6 percent increase in rents the company reported in 2021. It's still well above pre-pandemic increases from 3.4 percent and 2.3 percent in 2018 and 2019 respectively.
Rents plunged during 2020, driven by an urban exodus from high-cost coastal metros like New York City, San Francisco, Los Angeles, and Seattle. Many of those same cities are where rents are growing the fastest—alongside many of the Sun Belt metros where people fled to during the pandemic.
That suggests at least a partial reset of migration patterns during the pandemic. People are returning to the city (although not necessarily to the office).
The upshot is that the country's housing affordability struggles aren't going anywhere. Some analysts warn that they're likely to get worse.
"Rent prices look to accelerate in the near term as rental demand remains exceptionally high from ongoing job additions and higher mortgage rates forcing people out of the homebuying market," Lawrence Yun, the National Association of Realtors chief economist, said in a statement to Barron's.
Inflation is a monetary phenomenon driven by a lot of new money entering the system thanks to the federal government's spending binge during and after the pandemic.
All else equal, new housing construction would help put downward pressure on housing costs. The odds of that happening are mixed. Multifamily housing construction is booming. Axios reports that 420,000 new apartments are supposed to be completed this year—a 50-year high.
But that explosion of new apartments is still coming after a decade of severe underbuilding. The latest federal data also show that single-family home construction is collapsing too.
In other words, rent is too damn high, and we can expect it to stay that way.