Relief eludes many renters as Fed raises interest rates
Already, new house construction fell sharply as borrowing costs climb, falling 14.4% in May to the lowest rate in more than a year. Early the data suggests that apartment construction is also taking a hit, which industry executives can attest to.
David Wali, who heads the Boise office of the Gardner Company, a developer of residential and commercial properties throughout the Mountain West, said the question of whether to build has been clouded by inflation, rising interest rates and the continued disruption of supply chains, causing builders to worry about completing projects, being ready to lease the units and being left without appliances.
The state of employment in the United States
Job gains continue to maintain their impressive pace, easing fears of an economic slowdown but complicating efforts to fight inflation.
These risks, in turn, caused lenders to become more conservative by forcing developers to invest more of their own money in projects, further hampering development.
Mr Wali has already started delaying projects, including 500 apartments in the Boise area, and he said that as the lack of new development works its way through the system in the coming months, supply will be further restricted. The flip side – good for him, bad for tenants – is that rising rental demand makes him feel good about the level of rents for the apartments his company already owns.
“Those are fantastic,” he said.
The nation may see a geographic shift in which rental markets are hot. Early in the pandemic, when remote work offered people geographic flexibility, places like Orlando and Tampa, Florida, and Rochester, NY saw pronounced rent growth. Now some towns in the center of the country are cooling, even as offices call back workers and coastal markets like New York City is heating up.
“I’ve been practicing for 42 years and I’ve never seen the huge, widespread demand for rent increases that I see now,” said Samuel Himmelstein, a New York City tenants’ rights attorney. said clients contact him regularly now to see if they can do something about the landlord’s demands for 20-30% higher rent.