Housing market pressures push tenants into bidding wars: NPR

Brandon Schwedes of Port Orange, Fla. 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 he could find another apartment he could afford.

Brandon Swede


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Brandon Swede


Brandon Schwedes of Port Orange, Fla. 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 he could find another apartment he could afford.

Brandon Swede

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

Then, she says, the listing agent told her to “Submit your best and last!” Your real estate agent said yes, that meant above the asking rent. Da Costa had already lost once so they agreed to bid more.

“In this place, which was actually smaller than the place we had lived before and was more expensive, we offered $150 more rent a month,” she says. “And we still don’t get it.”

That happened again and again. And not just in big cities.

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

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

The landlady said she knew that was out of his reach. Sweden’s rent was already almost half his net salary. Nonetheless, he applied for another spot, listed at $1,750, and was told he had a ban on it. But the next day the agent apologized, someone else had just bid $200 more, unseen.

Schwedes eventually found a place in his previous rental, a much smaller townhouse with no garden or garage and further from his children’s school. He says the whole process has shattered his long-standing hopes of eventually buying a home. He wants to build justice and be able to pass something on to his children. He also longs for a place to decorate where family could always gather during the holidays and where future grandkids could visit, “the stuff you think is normal, you see in movies growing up.”

Now he feels that cornerstone of the American Dream will never materialize for him.

“I’ve lived in the same area for 20 years. I know what these houses were rented for and what they were sold for,” he says. “But what has happened in the last two years is like a boom. … destruction.”

Historically low vacancies have pushed rents to record highs

Many forces have come together to create a rental market that is setting records for vacancies and high costs. A big one is the historic housing shortage.

Jessica Lautz of the National Association of Realtors says that since the last housing crash, the United States “has been underproducing both rental units and homes for sale for more than a decade.” The gap is in the millions and is particularly acute in single-family homes. The number of new construction starts has finally picked up, although delays in the supply chain mean that houses and apartments are taking longer to complete.

Meanwhile, rising mortgage rates are making it more expensive to buy a home and forcing many to remain in the rental market. Additionally, the huge cohort of millennials entering their late 20s and early 30s are eager to move out on their own.

“And what we’re seeing is that demand is really pushing against this huge wave of young adults who are starting to start a household,” says Lautz. “There is no quick fix.”

In the first quarter of this year, a time when the rental market usually cools, apartment occupancy hit another all-time high – an extraordinary 97.6%. Asking rents for new leases increased nationwide by 15.2% and in many places even more.

“There is a serious shortage of rental housing at all price points in essentially every city across the country,” wrote Jay Parsons, director of business and industry at RealPage. He attributes much of the demand to unprecedented wage growth.

Bashir Nuruddin in front of one of the buildings he owns and leases in Chicago. When an apartment became available recently, he says: “I had so many calls that I just couldn’t answer.”

Bashir Nuruddin


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Bashir Nuruddin


Bashir Nuruddin in front of one of the buildings he owns and leases in Chicago. When an apartment became available recently, he says: “I had so many calls that I just couldn’t answer.”

Bashir Nuruddin

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

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

He’s had bidding wars, but he says they make him dingy, so he doesn’t allow them anymore. In fact, he prides himself on offering a price just below market. But he says the last two years have been tough.

A tenant stopped paying for almost a year but was unable to vacate it because of the pandemic moratorium. As she left, he discovered major damage to the place. “I spent over $25,000 on her apartment alone, between lost rent and repairs,” he says.

Also: “I really can’t remember how many devices we exchanged in the last year.” He reckons so much working from home has taken its toll on fridges, washing machines and air conditioners. And he’s seen repair work bids up 20% to 30% as inflation has picked up.

When the three-bedroom apartment opened for $1,200 a month, Nuruddin listed it for $1,785.

“I increased the rent by this drastic amount, not because I would normally do it,” he says, “but because I need to recoup all of these losses that I’ve had over the last year.”

He reckons he could probably have gotten $1,800 to $2,000 for it in the current market. In fact, all three people he showed it to bid 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 needs to buy more buildings to have enough income over the long term. He’s been saving for a down payment, but inflation is eating away at it, and now higher mortgage rates will make his next purchase much more expensive.

Although real estate is his retirement plan, Nuruddin believes housing should be considered a human right. He wants more rent control and more investment in public housing. And while it’s good to build more to address the historical shortage, he says it should be “the kind of housing that’s going to actually solve the problem, not just more McMansions or quick flips that fall apart after five or 10 years.” “.

Some low-income tenants are excluded entirely

The tight market and skyrocketing rents make it even harder for those who have always struggled to find housing.

“Just applying for an apartment is incredibly unaffordable for low-income renters,” says Lindsey Siegel of the Atlanta Legal Aid Society. “Once you’ve paid that application fee one, two, or three times, you’re left with no money to pay the first month’s rent or security deposit. And then you get stuck.”

Dana Johnson received an eviction notice after losing 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 more in rent on the open market.

She managed to get an emergency rental help to pay the repayment. But the landlord decided Johnson had to move out anyway.

“I just have to find as many jobs as possible because I have to pay astronomical rent at the moment,” she says.

To help, Johnson has already started her own company to sell dog clothes.

She has no family in Georgia and says relatives in New York City are already in a crowded living situation. If she can’t muster enough income, Johnson says, she’ll likely look for someone else who’s also struggling and needs a roommate.

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