Zoe Alvarez
The COVID-19 pandemic has had a significant impact on rental prices, with rents dropping across the US. This phenomenon, dubbed pandemic pricing, has resulted from the economic fallout of the pandemic, including widespread job losses and remote work. As a result, many people have chosen to move back in with their families or leave big cities with high rents. In response, landlords are offering various incentives, such as free months of rent or concessions, to attract tenants. While this has created opportunities for those seeking more affordable rentals, it has also highlighted the financial stress and rental debt that many renters are facing due to the pandemic.
| Characteristics | Values |
|---|---|
| Rents dropping across the US | Yes |
| Reason for drop in US | Economic fallout of the pandemic, shutdowns, and protests |
| Rents dropping in big cities | Yes |
| Reason for drop in big cities | Remote work, layoffs, and return to family homes |
| Incentives offered | Free months of rent or parking, gift cards, deposit waivers |
| Rents dropping fastest in large cities | East and West Coasts |
| Rents dropping in specific cities | New York, San Francisco, Boston, Chicago, Austin, Houston, Denver |
| Rents increasing in specific cities | Phoenix, Midwestern and Sun Belt cities |
| Impact on landlords | Harder to price units, offering concessions |
| Impact on renters | Negotiate for lower rents, especially at the end of a lease |
| Rental debt | Accumulated due to COVID-19, especially in California |
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What You'll Learn
Rents are dropping in big cities
The cities seeing the most rapid change are those with large tech companies that have allowed employees to work remotely, such as San Francisco and New York. As these workers left, it created enough vacancies to drive rents down. Additionally, the economic effects of the pandemic may have also played a role, as furloughed or laid-off workers may have been forced to move out of expensive apartments, creating further vacancies.
Year-over-year increases in rent have slowed every month in the US since the pandemic began, dropping from 3.8% in February to 0.7% in August. The median US rent stood at $1,771 in August, down 0.3% from July—the largest monthly decrease since September 2017. Rents in big cities like New York, Boston, Washington, Chicago, Austin, and Houston have all seen declines.
The COVID-19 pandemic has also fueled a rise in unemployment, particularly among low-wage workers, who are more likely to rent. This has resulted in an increase in outbound migration to the suburbs, leaving big cities with a higher vacancy rate.
As a result of these factors, rents in big cities are dropping, and renters may be able to negotiate lower rents with landlords, especially if they are nearing the end of their lease. However, it is important to note that the situation may vary depending on the specific city and neighborhood.
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Landlords are offering concessions
Rents have been dropping across the US as landlords react to the economic fallout of the COVID-19 pandemic. In May 2020, new leases were down 62% from the previous year. This was partly due to the shutdown, which prevented rental agents from showing apartments. However, there were also more apartments available as people left their leases.
In big cities, rents are falling due to COVID-19. Remote work policies have encouraged many to leave behind big cities and high rents. As these workers left cities such as San Francisco and New York, it created enough vacancies to drive rents down. Workers who were laid off may have been forced to move out of expensive apartments, creating further vacancies.
In addition, the economic effects of the pandemic may have made it difficult for some to pay rent. Government support through programs such as unemployment insurance and economic impact payments likely provided relief to renters and helped landlords. However, as these supports are pulled back, renters facing unemployment may struggle to meet their obligations.
Landlords may also consider waiving rent for a month, with an agreement to revisit the payment arrangement at a later date. This option may be suitable for tenants who are usually reliable but are currently facing financial difficulties.
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Remote working is impacting demand
Remote working is having a significant impact on rental demand, particularly in big cities. The pandemic has resulted in many companies offering employees the chance to work remotely on a permanent basis, and this has encouraged people to leave big cities and high rents. This trend is most noticeable in cities with large tech companies, such as San Francisco and New York, where rents have declined.
The economic fallout from the pandemic has also played a part, with many workers being furloughed or laid off, forcing them to move out of expensive apartments and creating vacancies. This has resulted in a rise in unemployment, particularly among low-wage workers, who are more likely to rent. As a result, there has been an increase in outbound migration to the suburbs, with more affordable rents and the option to buy a home.
The shift to remote working has also changed what renters are looking for in a property. While fancy amenities like gyms and pools were once sought-after, priorities have shifted towards home office space, in-unit laundry, and outdoor space.
The availability of remote work has also impacted the type of rental properties in demand. Smaller spaces and lower-priced apartments are seeing less interest, while larger apartments and higher-priced rentals are in higher demand.
Overall, remote working has had a noticeable impact on rental demand, particularly in big cities, leading to a decline in rents and a shift in the type of properties desired by renters.
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Rental prices are uncertain
The COVID-19 pandemic has had a significant impact on rental prices, with rents dropping across the US. This is partly due to the economic fallout of the pandemic, which has resulted in job losses and reduced income for many people. With fewer people able to afford high rents, landlords have been forced to lower their prices.
In May 2020, new leases were down 62% from the previous year, according to the Douglas Elliman report. This was partly due to the shutdown, which prevented rental agents from showing apartments. Additionally, many people left cities during the pandemic, leading to an increase in vacancies. As a result, rental prices in cities like New York, San Francisco, and Boston have seen declines. For example, in San Francisco, the median rent for one-bedroom apartments is down 9% from the previous year.
However, the impact of the pandemic on rental prices is complex and varied. While rents in some cities have decreased, rents in Midwestern and Sun Belt cities have risen. Additionally, some landlords are reluctant to permanently lower rents, instead offering concessions such as free months of rent or parking. These concessions may indicate that landlords expect rents to recover once the pandemic is over.
The future of rental prices remains uncertain. While some experts predict further drops in rental prices, others believe that rents in big cities will eventually pick up again as the economy recovers. In the meantime, renters can take advantage of the current market and negotiate for lower rents, especially if they are nearing the end of their lease or if there are many vacancies in their area.
Overall, the COVID-19 pandemic has disrupted the rental market, leading to a period of uncertainty and fluctuation in rental prices. While renters may currently benefit from lower rents in some areas, the long-term impact on rental prices remains to be seen.
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Rental debt is increasing
The COVID-19 pandemic has had a significant impact on rental prices and tenant behaviour. Rental prices have dropped in many major cities across the US, including San Francisco, New York, Boston, and San Jose. This is due to several factors, including remote work policies, which have allowed employees to leave big cities, creating vacancies and driving down rents. The economic fallout from the pandemic has also played a role, with many people facing job losses and reduced income, making it difficult to afford high rents in expensive cities.
While declining rents may provide some relief to tenants, the pandemic has also exacerbated rental debt, particularly among low-income individuals and people of colour. As of May 8, 2023, nearly six million renter households in the US were behind on their rent, a number that is about double the pre-pandemic baseline. These households collectively owe more than $10 billion in rent debt, and the majority of those affected are low-income people of colour. The pandemic's economic impact has disproportionately affected these communities, with 68% of those behind on rent in May 2023 having lost employment income at some point during the pandemic.
The racial wealth gap has been further widened by the pandemic, with homeowners, predominantly White, experiencing a $1.9 trillion increase in home equity from 2020 to 2021, while renters, predominantly people of colour, have accumulated rent debt. Federal rental assistance programs have been implemented to address this crisis, but the distribution of resources has been slow, with only 11% of allocated funds reaching those in need as of July 2023.
The situation has been particularly acute in California, where more than 460,000 renter households applied for COVID-19 rental assistance, and over 100,000 households are still awaiting a decision. The federal government has been working to speed up the distribution of rental assistance, but the threat of eviction remains for millions of households struggling with back rent.
In the current rental market, tenants who are not looking to move can also benefit from negotiating lower rents with their landlords, especially if they are nearing the end of their lease. Renters should research their local market and be willing to initiate conversations about rent reductions, as landlords may be more flexible during this uncertain period.
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Frequently asked questions
Yes, rents have decreased in many cities across the US due to COVID-19.
Big cities like New York, San Francisco, Boston, and Washington have witnessed a substantial decline in rents.
There are several reasons for the drop in rents. Firstly, the pandemic caused a wave of layoffs, affecting renters in expensive cities. Many people lost their jobs or experienced reduced income, leading to a decrease in demand for rentals. Additionally, remote work policies allowed people to move away from big cities with high rents.
Yes, the shutdowns and protests in some cities, such as New York, prevented rental agents from showing apartments, leading to an increase in available units and a decrease in competition.
COVID-19 has had a significant impact on renters, particularly those who were already in a precarious financial situation. Many renters have accumulated rental debt due to job losses and reduced income. In California, renters owed an estimated $400 million to $1.7 billion in unpaid rent as of December 2020.
