Rising rents are increasingly impacting residents with nearly 60 percent reporting their rents increased in the past 12 months and nearly one in five who experienced a rent increase saying they are extremely likely to miss a payment, according to a new Freddie Mac survey.
Of those surveyed, 26 percent reported a rent increase of 10 percent or less and 15 percent reported an increase higher than 10 percent. A smaller percentage (11 percent) reported an increase higher than 20 percent and 6 percent an increase of more than 30 percent. The survey found 40 percent of renters did not get a rent hike in the past 12 months and just 2 percent reported a rent decrease during that period.
For those who experienced rent increases, a total of 57 percent reported they were likely to miss a rent payment. Nearly 38 percent stated they were somewhat likely to miss a payment and 19 percent said they were extremely likely to miss a rent payment. Just under 30 percent—29 percent—reported they were not very likely to miss a rent payment and 14 percent said they were not at all likely to miss a payment. For a third of renters who received a raise at work this year, 32 percent said it was not sufficient to cover their increased rent.
The nationwide survey, conducted online from June 6 to June 10, sampled 2,000 consumers aged 18 and older to gauge the impact of rising prices on housing choices. The questions were specific to renters.
In its 2022 Midyear Multifamily Outlook released earlier this month, Freddie Mac noted rent growth remains exceptionally high, increasing by 16 percent year over the year ending in June. More markets have seen higher rent growth over the past 18 months compared with the five years prior to the start of the pandemic. Since January 2021, every market saw rent increases of at least 10 percent and about two-thirds had rent growth of 20 percent or higher.
Kevin Palmer, head of Freddie Mac Multifamily, said in a prepared statement the surge in rents occurring over the last 12 months has created even greater housing uncertainty for the most vulnerable renters.
Facing increasing costs
The Freddie Mac survey showed an overwhelming number of respondents—96 percent—have been impacted by higher prices in the past 12 months. The highest number of those surveyed (66 percent) cited increased costs for groceries and household supplies as main drivers, followed by 54 percent stating transportation costs, 51 percent choosing eating out followed by utilities at 49 percent and clothing at 35 percent respectively.
While it was lower in the responses, 22 percent said costs to rent a home impacted their spending and 14 percent said costs to buy a home. To deal with rising costs, 48 percent of respondents said they were spending less on non-essential items like entertainment, followed by putting less money toward savings (44 percent), spending less on food, utilities and other essentials (41 percent), and delaying non-essential repairs or improvements to their homes (25 percent). Increasing spending on credit cards, delaying essential home repairs and trading off which monthly bills can be paid all tallied 18 percent from respondents.
Moving to a less expensive neighborhood, less expensive home in the same area and getting a roommate or leasing part of their home each received 7 percent.
More than three in five survey respondents (62 percent) were somewhat or very concerned about their ability to pay for housing within the next 12 months and 3 in 5 households said they sometimes don’t have enough for basics or live payday to payday. Half of the respondents feared losing their jobs within the next year and 84 percent stated they were somewhat or very concerned about an impending economic recession.
The survey found nearly three-quarters of renter households who have changed their homebuying plans this year said they’ve become at least somewhat less likely to buy a house over the next 12 months. Of those stating they were less likely to buy, 44 percent cited high home prices, 32 percent pointed to increased interest rates and 29 percent said would have difficulty coming up a down payment.