The United States is currently going through a serious affordable housing crisis, and both property values and rent are increasing around the country. This means that it is becoming more and more difficult for people to make rent, especially in major cities.
While most of the country is currently experiencing increases in rent, rent in some cities is growing at an extremely high rate compared to the national average. Although renting is generally more affordable than buying, that may not be the case in certain locations. These are six of the American cities with the fastest increasing rent in 2019.
San Francisco
San Francisco is the city most closely associated with the American housing crisis, and it’s easy to see why. Its rent prices are rising faster than those of any other city, with an annual increase of nearly 15 percent. This is an especially high rate considering that San Francisco is already one of the most expensive cities in the country.
The city’s population and economic production increased exponentially during the tech boom, and there simply aren’t enough properties to host so many new people. It will take time for development to match the growing demand.
That said, there is more to San Francisco’s housing crisis than a simple lack of space. In fact, there are roughly 100,000 vacant homes in the metropolitan area, yet the city continues to struggle with homelessness. It will take time to address such a complex issue, so don’t expect prices to fall anytime soon.
If you choose to move to San Francisco, keep in mind that your rent could rise much more quickly than inflation. If you can barely cover your initial rent, you might have trouble affording such a dramatic increase. Make sure you have enough money to cover a potential bump.
If you’re a real estate investor looking to benefit from the increasing rent, read this first: Is Investing in the San Francisco Real Estate Market Worth It?
Denver
Denver is currently one of the fastest-growing cities in the United States, and its rent prices are rising accordingly. While the increase isn’t quite as dramatic as in San Francisco, it’s still surprisingly high at just over 10 percent. Property in Denver is a lucrative real estate investment if you can afford it, but rent could quickly become prohibitively expensive.
That said, prices in Denver are significantly more affordable than those in larger cities like San Francisco, New York, and Los Angeles. Even if rent continues to increase, you could still pay much less for an apartment in Denver compared to many other locations. On the other hand, you could save even more by moving to a city that isn’t experiencing such rapid growth.
Since Denver’s prices are substantially lower, even a high rate of change could still add less to your rent each year than a smaller percentage in a more expensive city. The city doesn’t have the same support for rent control that keeps rent in San Francisco from rising more than a certain amount each year. Keep these ideas in mind when planning a move to Denver.
If you’re a real estate investor looking for the best place to invest in Denver, read: Where to Invest in the Denver Housing Market in 2019.
Portland, Oregon
Portland is another West Coast city that’s becoming more and more expensive every year. Its average rent increase is slightly higher than 7 percent, lower than both Denver and San Francisco. Its cost of living is closer to Denver than San Francisco, and you can find properties with lower rent if you’re willing to move outside the downtown area.
To combat the effects of rising rent costs, the state legislature recently passed the first statewide rent control law, limiting increases to 7 percent—roughly the city’s average annual change. This number will be adjusted by economists each year, so remember that it’s not meant to be a static cap.
On the other hand, this legislation doesn’t apply to vacated properties unless the previous tenant was evicted without cause or they only leased the place for a single year. If you’re moving to the city for the first time, it could be tough to find a landlord who doesn’t raise the rent after a tenant leaves.
Oregon was the first state to pass a rent control law, but other state legislatures may follow their lead if housing prices continue to rise so quickly. Cities and states are generally becoming more aggressive in fighting rent increases as the effects have become even more problematic.
As a real estate investor, you can still invest in areas with rent control. Learn more here: How to Invest in Areas with Rent Control.
Houston
Rent in Houston increases at roughly 6 percent per year, although prices are still affordable compared to many cities with similar populations. Housing availability has dropped so much that there are now more than 100,000 people on Houston’s affordable housing waiting list
Demand for affordable housing increased dramatically after Hurricane Harvey, but it may return to normal levels over time. Houston isn’t growing as quickly as cities like Denver and Seattle, so its high average annual rent change is more likely to drop in the next few years.
That said, it will take time for the city and state to completely recover from the effects of the hurricane, and the housing market will continue to be competitive until supply catches up to demand. It’s hard to predict exactly how long the market will take to reset.
Los Angeles
Like San Francisco, Los Angeles struggles with a large homeless population along with skyrocketing rent throughout the city and metro area. Its average annual increase of 5 percent will make a big difference in your rent payment, as Los Angeles is already one of the top five most expensive housing markets in the United States.
These two cities deal with many similar issues, and construction in California simply can’t keep up with the need for new housing. Employment growth significantly outpaces housing development, so the problem could continue to get worse in the near future. Economists and lawmakers at both the city and state levels are working on solutions for California’s housing crisis.
A recently proposed bill known as SB50 could change the way properties are zoned near public transport stops and in areas with a high number of jobs. If passed, landlords would be able to build mid-rise apartment buildings in these areas, rather than being zoned for single-family housing.
If you wish to invest in Los Angeles real estate, here are a few tips to help you out: 4 Tips for Investing in the Los Angeles Real Estate Market.
Seattle
Seattle’s rent increase rate is equal to that of Los Angeles at 4.9 percent, and the city has been dealing with a housing crisis of its own. It comes in just a few spots after Los Angeles as the eighth most expensive market in the US.
As in California, the lack of affordable housing has driven Seattle to consider legislation similar to SB50. This bill would end single-family zoning and open these properties up to multiple tenants. On the other hand, many homeowners oppose the bill and claim that it could harm homeowners and the environment.
The tech industry brought sudden growth to Seattle, and it has continued to be one of the fastest-growing cities in the United States. It’s impossible to predict whether the city will be able to bring prices down over the next several years.
Rent is already high in many of these cities, and you should expect it to become even more expensive in the near future. While there’s no way to tell how the market will change in a given year, you should consider potential rent increases when budgeting for an upcoming move or when deciding where to invest in real estate.
This article has been contributed by Logan Allec.