Housing shortage forces tenants into bidding wars: NPR

Brandon Schwedes of Port Orange, Florida, with his 11-year-old daughter and 8-year-old son. Schwedes had to move this year when the landlord drastically increased the rent and was then outbid before finding another place he could afford.

Brandon Sweden


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Brandon Schwedes of Port Orange, Florida, with his 11-year-old daughter and 8-year-old son. Schwedes had to move this year when the landlord drastically increased the rent and was then outbid before finding another place he could afford.

Brandon Sweden

When Sarah Da Costa had to find a new apartment in Chicago this year — with her husband, baby and dog — the whole process seemed weird. First, there were open houses, something she thought was just for buying houses. On one of them, “people literally didn’t even fit in the house, and we were there right when it started.”

Then, she says, the broker told her to “submit your best and last!” Her broker said yes, that meant above the requested rent. Da Costa had already lost once, so they agreed to bid more.

“In this place that was actually smaller than the place we lived before, and which was more expensive, we offered $150 more per month in rent,” she says. “And we still haven’t got it.”

That happened again and again. And it’s not just in the big cities.

Brandon Schwedes of Port Orange, Florida, had no plans to move this year, and the 40-year-old single father — a logistics account manager — hadn’t saved any money. But his landlord said she wanted to sell the house, so Schwedes started looking around. That’s when he got another shock.

“I found the house I lived in for rent for $2,000,” he says. “And I paid $1,400.”

The landlord said she knew that was out of his reach. Schwedes’ rent was already almost half of his net wages. Still, he applied for another place with a prize of $1,750 and was told he had a lock on it. But the next day the agent said sorry, someone else had just bid $200 more, unseen.

Schwedes eventually found a place at his former rental, a much smaller mansion with no garden or garage and further from his children’s school. He says the whole process has shaken his old hopes that he would ever be able to buy a house. He wants to build his own wealth and pass on something to his children. He also craves a place he can decorate, where the family can always get together for vacations and visit future grandchildren, “the things you think are normal, that you see growing up in movies.”

Now he feels that this cornerstone of the American dream will never happen for him.

“I’ve lived in the same area for 20 years. I know what these houses were renting and selling for,” he says. “But what’s happened in the past two years, it’s like a boom. … Destruction.”

Historically low vacancy rates have pushed rents to record highs

Many forces have joined forces to create a record-breaking rental market due to a lack of vacancy and high costs. A major one is a historic housing shortage.

Jessica Lautz of the National Association of Realtors says the United States has “underperformed both rental and owner-occupied homes for more than a decade” since the latest housing crash. The shortage runs into the millions and is especially acute for single-family homes. The amount of new construction that has started has finally risen, although supply chain delays are causing houses and apartments to take longer to complete.

Meanwhile, rising mortgage rates are making it more expensive to buy a home, forcing many to stay in the rental market. And to add to all this, the huge cohort of millennials in their late 20s and early 30s are eager to get on their feet.

“And as we see, this question is really pushing this huge wave of young adults starting to form a household,” Lautz says. “There is no quick fix.”

In the first quarter of this year, a time when the rental market usually cools, apartment occupancy rates hit another all-time high, an extraordinary 97.6%. Requested rents for new leases rose by 15.2% nationally, much more than that in many places.

“There is a serious shortage of rental housing in all price ranges and in virtually every city across the country,” wrote Jay Parsons, chief economics and industry directors for RealPage. He attributes much of the demand to unprecedented wage growth.

Bashir Nuruddin in front of one of the buildings he owns and rents in Chicago. When an apartment recently opened, he says, “I’ve had so many calls that I just didn’t answer anymore.”

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Bashir Nuruddin


Bashir Nuruddin in front of one of the buildings he owns and rents in Chicago. When an apartment recently opened, he says, “I’ve had so many calls that I just didn’t answer anymore.”

Bashir Nuruddin

It’s a seller’s market, but landlords are also struggling with higher costs

Bashir Nuruddin and his wife own nine rental properties in Chicago, and one recently opened. “I had so many phone calls that I just stopped answering calls,” he says. “Over 100 people, in between emails and phone calls, contacted me about that apartment.”

He’s had bidding wars, but he says they make him feel bad, so he no longer allows them. He is even proud to offer a net below market rate. But he says the past two years have been tough.

One tenant went off-pay for the better part of a year, but because of the pandemic moratorium, he couldn’t evict her. When she left, he discovered extensive damage to the place. “Her apartment alone, between lost rents and repairs, I spent over $25,000,” he says.

In addition, “I really can’t remember how many appliances we replaced in the past year.” He thinks that so much working from home took its toll on refrigerators, washing machines and air conditioners. And he has seen bids for repair work rise 20%-30% as inflation has risen.

Given all that, when the three-bedroom unit opened at $1,200 a month, Nuruddin listed it for $1,785.

“I’ve increased the rent by this drastic amount, not because I normally would,” he says, “but because I have to recoup all those losses from the past year.”

He calculates that he could probably have gotten $1,800-$2,000 for it in today’s market. In fact, all three people he showed it to offered more, but he turned down the higher bids.

Nuruddin says he also feels the downside of the housing market. Renting apartments is his retirement plan and he has to buy more buildings to have enough income in the long run. He’s been saving for a down payment, but inflation is eating away at that, and now higher mortgage rates will make his next purchase much more expensive.

While real estate is his retirement plan, Nuruddin believes housing should be considered a human right. He would like to see more rent control and greater investment in public housing. And while it’s good to build more to address the historic shortfall, he says it needs to be “the kind of housing that’s actually going to solve the problem, not just more McMansions or quick flips that start splitting up after five or 10 years.” to fall.”

Some low-income renters are completely locked out

The tight market and skyrocketing rents make it even more difficult for those who have always struggled to find a home.

“Applying for apartments alone is incredibly unaffordable for low-income renters,” said Lindsey Siegel of Atlanta Legal Aid Society. “If you pay that registration fee once, twice or three times, you will no longer have money to pay the first month’s rent or the deposit. And then you are stuck.”

Dana Johnson was given a eviction notice after she lost her job as a real estate leasing agent last year. The 54-year-old lives northeast of Atlanta and was determined to stay in her one-bedroom apartment so she wouldn’t have to pay hundreds of dollars in rent on the open market.

She managed to get emergency aid to pay the arrears. But the landlord decided that Johnson had to move anyway.

“I just need to find as many jobs as I can get because I now have to pay rent that is astronomical,” she says.

To help, Johnson has already started her own business selling dog clothes.

She has no relatives in Georgia and says relatives in New York City already live in crowded living arrangements. If she can’t raise enough income, Johnson says, she’ll likely find someone else who is also struggling and needs a roommate.

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