The cost of renting an apartment or home is climbing quickly, keeping inflation high and making life tougher for households on a tight budget.
The price of renting a primary residence climbed by 5.2 percent in the year through May, with the cost rising 0.6 percent compared to the prior month, matching its quick pace in April. A measure that uses rents to estimate the consumption value of owning a home is also picking up rapidly, and actually accelerated slightly on a monthly basis.
Housing costs make up a big part of the overall inflation index, so they are keeping pressure on prices overall even as the Federal Reserve raises interest rates to cool inflation down. In fact, there could be a period when higher mortgage rates prevent renters from moving into homeownership, keeping the rental market stretched.
Further rent inflation is a near inevitability. Market rents increased sharply throughout 2021, and those trends seep slowly into the official inflation data, since they measure not just new leases but also existing rentals.
“The rental market feels very tight: Vacancies are very low, and because of that rents are raising at a strong clip,” Igor Popov, the chief economist at Apartment List, a listing site, said ahead of the inflation report. “Rent growth and occupancy are off of Everest peak and back at base camp, but we’re still a long way from the sea.”