Rent on single-family homes rose by 12% from December 2020 to December 2021, which was more than three times the previous increase. It was the largest year-over-year increase since the CoreLogic Single-Family Rent Index started tracking rental data 16 years ago, and while the index growth managed to slow over last summer, rent growth is still higher than pre-pandemic levels when compared with the data from 2019.
What is the Single-Family Rent Index?
CoreLogic’s Single-Family Rent Index, or SFRI, tracks changes among single-family rental homes using a repeat-rent analysis to measure the same properties over time. According to the SFRI, there were record increases in both low-price and high-price rental properties, which contributed to the overall gain.
Single-Family Rent Growth by Price Tier
Rent costs for the low-price tier, which is defined as properties with rent less than 75% of the region’s median rental price, increased 8.3% last year, up from 2.4% in 2020. High-price rentals, which are defined as a property with rent prices greater than 125% of the region’s median rental price, rose 11% last year, up from 2.8% the previous year.
Growth by Property Type
During the pandemic, more renters chose to live in standalone properties in lower-density areas. A detached property is defined as a free-standing residential building, as opposed to an attached property type such as a duplex, townhouse, or condo. Rent growth on detached rentals increased 12.2% last year, compared with only 7.8% for attached rental properties.
Growth in Metro Areas
Of the 20 metro areas shown in the SFRI report, Miami had the highest year-over-year rent growth with 25.7%. Phoenix followed at 19.8%, then Las Vegas at 15.9%. These likely increased due to tourism returning to normal as pandemic restrictions lift.
Chicago showed the lowest rent increase at only 2.8%. Boston, Washington D.C., Philadelphia, and New York also showed low rent growth of under 5%.
Why is it rising?
More and more people are in the market for rentals as consumers continue to get priced out of buying a home. Many families can’t afford to pay the increasingly high asking prices for the low inventory of homes for sale, so they resort to renting a single-family home instead.
Although 93% of consumers believe that owning a home is a good investment, competition in the housing market forces more buyers to remain renters instead. Single-family rental units are the most popular choice since people want more space for their families, and as the labor market improves, the demand for larger single-family homes will grow as well.
Since occupancy rates are at a record high, rentals will keep rising in price and may become more difficult to find. Rental unit vacancies have practically disappeared since when one renter gives notice to move out, another renter swoops in to take over the unit. Gone are the days when rental units are available, so rental owners can charge more due to increased demand.