Why are rents increasing? Rent surged in expensive housing market

SALT LAKE CITY — Jennifer Fei, 48, has felt the pinch every year. But over the past couple of years, especially, the rental market's stranglehold on her household budget has been tightening.

She moved into a quaint, two-bedroom duplex in the Sugar House neighborhood of Salt Lake City roughly seven years ago. At the time, her monthly rent was $1,300, which she said seemed like a pretty good deal.

"Over the years, there have always been increases — $100 here, $50 there," Fei told the Deseret News. When she signed her lease for 2020 to 2021, it went up by $150.

Then, for 2022, it shot up $410, she said.

"Just within two years, I saw like a $550 increase in rent," she said. "So it's pretty significant."

Now, Fei says her rent sits at just below $2,000 a month.

Meanwhile, her wages remain stagnant. As a sales representative, Fei said she earns about $60,000 a year. During the height of the COVID-19 pandemic, she said she made less as the pandemic took a toll on her commission, which she earns from selling products to retailers and restaurants.

As a single mother of two teenage children who makes what she considers a "decent" income, it's frustrating that rent would be so expensive for a modest, two-bedroom home — especially considering wages haven't kept nearly in pace with such rapid price growth.

Still, she feels trapped. Looking around her, in her same neighborhood, Fei has watched prices balloon. The typical two-bedroom apartment in her area "starts at $2,000 a month," she said. "Most are $2,500 to $3,000 a month, especially in all these new apartments."

"Who is affording this?" she questioned.

Utah's median individual income was $31,855 in 2020, according to the U.S. Census Bureau. For households, it was $74,197.

Why are rent prices so high?

As housing prices in Utah and across the nation ramped up to record levels during the pandemic housing frenzy from mid-2020 until early 2022, it's had an extraordinary impact on the rental market.

If renters — who faced steady, yearly rent hikes even before the pandemic stomped on the accelerator — were having a tough time before, the pressure is only mounting now as the housing market continues to reel from over 6% mortgage rates.

Even before the Federal Reserve's fight with inflation, rents rose at faster rates over the last two years than they have in the past decade.

Between 2010 and 2020, asking rents ticked up by 2.6% annually. Fast forward to between 2020 and 2022, and rents rose 10.5% annually in that two-year window.

That's according to a new report published this week by the University of Utah's Kem C. Gardner Policy Institute, penned by Dejan Eskic, a senior research fellow a the institute and one of Utah's leading housing experts.

By Eskic's calculations, about 71% of Utah households were priced out of Utah's median-priced home by the spring of 2022, which crossed the $500,000 mark in February. That figure was even higher in Salt Lake and Utah counties.

As more would-be buyers turn away from the market amid still record high home prices and mortgage rates not seen since 2008, that's upping the pressure on the rental market.

"The narrowing path to homeownership has increased the demand for rental housing," Eskic wrote. "Renter households across the Wasatch Front experienced as much rental price growth in two years (between 2020 and 2022) as they did in the prior 10 (between 2010 and 2020)."

As a result, renters trapped between rising rent prices and out-of-reach home prices are stuck, vulnerable to annual rate hikes and potential instability if they're priced out of their current homes.

How much is rent in Utah?

Out of all four Wasatch Front counties, Salt Lake County saw the largest change in absolute growth in rent, according to the report.

• In Salt Lake County, the average asking rent grew from $1,213 in early 2020 to $1,534 in the second quarter of 2022, according to the report. That's a $321 jump — an 11% increase each year, amounting to an over 26.4% hike in two years.

"The two-year increase is greater than the increase of $135 experienced between 2000 and 2010 and the $213 increase between 2010 and 2020," Eskic wrote.

• Davis County comes next in line in terms of absolute growth in rent, with an average rent that increased by $294 from $1,158 in early 2020 to $1,452 in 2022. That's an annual increase of 10.6%.
• Weber County ranked third in absolute rent growth, with an average rent that went up from $1,091 in early 2020 to $1,380 in 2020, a $289 increase at an annual rate of 11%.
• Utah County rents increased from $1,213 in 2020 to $1,475 in 2022, an annual rate of 9.1%.

Trapped

Fei wonders how long she can hang on to her current home, seeing downsizing as perhaps her only option at this pace.

"Next year, if my landlord decides to raise rent, I might have to move into a one-bedroom. That's the reality of my finances," she said. "If I'm not making more money, I can't afford to stay here."

She's thought about owning, but as a single mother her age and prices being what they are, she doesn't see that as an option.

"I'm at a point now where I think I am permanently priced out of the market," Fei said. "I'm old enough, with teenage kids, don't have enough savings ... if I don't have real estate at this point, at 48 years old, I'm not going to. I mean, to be very honest."

She questioned how anyone is able to save for a home down payment these days, especially given how fast rent prices have climbed.

"I don't know how you can save when rent is 40% to 50% of your monthly income," she said. "If I were in a better financial situation, yeah I'd be looking. But at this point with interest rates and monthly payments, you're looking at paying as much as rent these days."

Fei also said her situation could be worse. She said while she's facing downsizing, other Utahns and their families may be simply priced out of rentals everywhere in the Salt Lake area. It's not just monthly rental costs, but also deposits — first and last month's rent — that break the bank.

Fei said that as she was driving down the street the other day, she noticed someone who had a dining table and chairs on a dolly, along with a pile of his stuff next to him.

"These homeless people aren't homeless because they have, you know, mental health issues or drug issues," she said. "They're homeless because they get to a point where they can't afford where they live, and they have nowhere else to go."

Related topics