Low-Income Renters Aren’t Benefiting From Price Declines

While rents have declined in many areas of the country during the pandemic, low-income renters haven’t necessarily benefited.

In its February market report, Zillow said the more-expensive metro submarkets softened the most, providing little respite for renters in lower-priced areas. In fact, Zillow found rents remained “stubbornly high in more-affordable areas.”

In New York, rents in wealthier neighborhoods dropped 11.6%, while they actually rose 1.8% in 1.8% in the least-expensive areas.

Overall, rents are beginning to recover, according to Zillow. For the second month in a row, rents grew substantially—rising 0.4% after a 0.5% gain in January. But while things may have bottomed out, there is still more ground to cover before rents hit normal levels. Rents are up 0.5% year over year, which is behind the 3.7% annual pace in February 2020.

“While the pandemic has cut into demand for rental housing, that has only translated into declining rents in expensive markets, and most acutely at the top-end of those markets,” said Zillow senior economist Jeff Tucker in a prepared statement. “This past year saw widespread adoption of work-from-home policies, especially for higher-income renters who previously paid top dollar for proximity to their workplace. Demand for these rentals took a hit as many leapt into homeownership, while the flow of new renters entering these sub-markets dried up, at least temporarily.”

Home values, on the other hand, continued to soar, matching record monthly growth from months prior, according to Zillow.

The typical US home was $272,446 in February, which was a 1.1% increase. That was similar to the increases in January and December. Zillow says this is the fastest monthly appreciation since 1996, which puts it above the previous high of 1% set in the summer of 2005.

Annual home value growth across the US jumped from 9.1% in January to 9.9% in February, the highest yearly appreciation since April of 2006 and an increase of $24,473 for the typical US home. For-sale housing inventory fell 8% from January and is down 30.3% year over year.

Mortgage rates are ticking up, however, rising from a monthly low of 2.58% on February 10 to 2.98% as the month ended. Still, they are below historical standards and the 3.91% recorded last February.

Other reports are also showing stabilization in rent prices. Realtor.com research showed that the US median rent across the largest 50 metros in the country was up 0.8% in January to $1,442, below the pre-pandemic growth rate of 3.2%. The report also showed that like homeowners, renters are increasingly favoring smaller, less expensive markets with strong schools and local economies over pricier tech hubs.