For many 2014 went into the books as the year of the rent increase. That wouldn’t happen again they said; rents couldn’t keep going up that fast they said. They were wrong. So far, 2015 has been another banner year for rent increases, with rents up 5.1% in September from the same month a year ago, the eighth straight 5% increase. Rent increases are beating inflation and are going up faster than personal income growth. If you’re feeling strained by housing costs, it’s not your imagination. The rent really is too damn high.
Not High Everywhere
The demand for apartments is being driven primarily by young, urban dwellers. The demand for apartments in the suburbs is actually declining in many areas. So, just building apartments is not the answer for the demand side of the equation. Where those new apartments are located means a lot when it comes to answering the need.
More Bad News Ahead
Young people want the freedom that renting gives them. The biggest advantage one can have in the modern job market is mobility. That mobility is coming at a higher and higher cost and the high cost of renting pushes people to consider buying. Depending on the market, housing prices are simply out of reach for many first time buyers, leaving young people with few options.
A lack of affordable housing is pushing some people to consider extreme measures. Living in vans is becoming fairly common in some high rent locations.
One Google employee bought a light commercial truck and sleeps in that parked in the company parking lot. Don’t laugh; he’s able to bank 90% of his income and will be able to pay cash when he’s ready to buy a house.
Other people are converting commercial warehouses and industrial space into places to live. This can be dangerous because industrial spaces aren’t vented like living space and may not have fire escapes. Since living in industrial space is regulated by zoning laws in many areas, you may want to investigate the cost of getting caught if you decide to try it.
Living on a boat is an alternative if you live in an area with a waterfront. While that can be a low-cost alternative, you have to know a lot about boats to make it work.
Tiny houses are yet another alternative but, again, you’ll need to check zoning laws and figuring out where to park one can be problematic as more people get into the tiny house game.
What’s a guarantee is that the tug of war between rents and keeping a roof over your head will continue. More people will be looking for alternatives to sky high rents.