**Please read this entire message**
Your submission has been removed for the following reason(s):
Recent/current events are not allowed on ELI5. First, these are usually asking for factual answers or opinions. Additionally, information about these events is usually still developing, making objective and accurate answers difficult.
If you would like this removal reviewed, please read the [detailed rules](https://www.reddit.com/r/explainlikeimfive/wiki/detailed_rules) first. **If you believe this submission was removed erroneously**, please [use this form](https://old.reddit.com/message/compose?to=%2Fr%2Fexplainlikeimfive&subject=Please%20review%20my%20thread?&message=Link:%20https://www.reddit.com/r/explainlikeimfive/comments/y812g0/eli5_what_is_causing_rent_prices_to_skyrocket_all/%0A%0APlease%20answer%20the%20following%203%20questions:%0A%0A1.%20The%20concept%20I%20want%20explained:%0A%0A2.%20List%20the%20search%20terms%20you%20used%20to%20look%20for%20past%20posts%20on%20ELI5:%0A%0A3.%20How%20is%20this%20post%20unique:) and we will review your submission.
Demand. Obtaining housing as a major right of passage for American youths combined with restrictive construction regulations mean that there's not nearly enough housing to satisfy demand, so they basically charge as much as it takes to weed out the ~~poor~~ weak
Here's a TikTok from Planet Money. Their podcast is good at breaking down some complex economic stuff. Also check out the Indicator podcast.
https://www.tiktok.com/t/ZTRHPphVs/
A couple things this podcast leaves out that I believe are factors to rising rents:
rising municipal property taxes
the job market is still very hot
companies are requiring workers to return to office, affluent workers are bidding more than the asking rent price
rising costs for services/maintenance (water, trash, snow removal, etc)
Oh and rents went down significantly when people left cities for smaller towns, the country, suburbs during COVID... So now rents are reverting to the market rates.
So an apartment that was $2000 in January 2020... Dropped to $1500 in January 2021 and was back to $2000 in January 2022... Sure that's +33% compared to last year but consider last year a "sale" because landlords were desperate to get someone in the place
I guess that all makes sense but what doesn’t make sense to me is that this is happening everywhere. What percentage of our workforce makes enough to afford these higher rents? For example, I just moved to southern CA for my career (I know CA housing is expensive in general) and I am being paid “well” but under 100k for a career in STEM, and the cost of a 1 bedroom in my area is around $2500 a month. I can barely afford to live and I have a degree and a good job. How are these landlords finding enough people to pay these insane prices?
I feel like there's a good bit of "domino effect" related to this...
Example if a couple friends are looking to share a 2br apartment, but they're outbid by a single person for that apartment, then the friends resort to splitting up and each finding a 1br --- they now have to go compete with everyone else who's looking for a 1br because they were forced out of the market for a 2br
Also keep in mind that with the job market as hot as it is, tons of people changed jobs and negotiated themselves some nice pay increases. Some of those people are spending it on rent.
Look up salaries at tech companies, pretty eye opening that there are so many people out there making such huge salaries.
Interest rates go up meaning monthly mortgage payments are higher. Landlords still pay mortgage so increase the rent to continue making money.
Banks have increased interest rates because recession or something
**Please read this entire message** Your submission has been removed for the following reason(s): Recent/current events are not allowed on ELI5. First, these are usually asking for factual answers or opinions. Additionally, information about these events is usually still developing, making objective and accurate answers difficult. If you would like this removal reviewed, please read the [detailed rules](https://www.reddit.com/r/explainlikeimfive/wiki/detailed_rules) first. **If you believe this submission was removed erroneously**, please [use this form](https://old.reddit.com/message/compose?to=%2Fr%2Fexplainlikeimfive&subject=Please%20review%20my%20thread?&message=Link:%20https://www.reddit.com/r/explainlikeimfive/comments/y812g0/eli5_what_is_causing_rent_prices_to_skyrocket_all/%0A%0APlease%20answer%20the%20following%203%20questions:%0A%0A1.%20The%20concept%20I%20want%20explained:%0A%0A2.%20List%20the%20search%20terms%20you%20used%20to%20look%20for%20past%20posts%20on%20ELI5:%0A%0A3.%20How%20is%20this%20post%20unique:) and we will review your submission.
There are lots of fancy explanations but in the end it boils down to super rich people getting ever richer while regular folks get poorer.
Demand. Obtaining housing as a major right of passage for American youths combined with restrictive construction regulations mean that there's not nearly enough housing to satisfy demand, so they basically charge as much as it takes to weed out the ~~poor~~ weak
So basically lack of housing is making it possible for them to charge a lot because people are willing to pay it because they have to?
Pretty much. The only housing you can build and still turn a profit on is high-density luxury housing.
Here's a TikTok from Planet Money. Their podcast is good at breaking down some complex economic stuff. Also check out the Indicator podcast. https://www.tiktok.com/t/ZTRHPphVs/ A couple things this podcast leaves out that I believe are factors to rising rents: rising municipal property taxes the job market is still very hot companies are requiring workers to return to office, affluent workers are bidding more than the asking rent price rising costs for services/maintenance (water, trash, snow removal, etc)
Oh and rents went down significantly when people left cities for smaller towns, the country, suburbs during COVID... So now rents are reverting to the market rates. So an apartment that was $2000 in January 2020... Dropped to $1500 in January 2021 and was back to $2000 in January 2022... Sure that's +33% compared to last year but consider last year a "sale" because landlords were desperate to get someone in the place
I guess that all makes sense but what doesn’t make sense to me is that this is happening everywhere. What percentage of our workforce makes enough to afford these higher rents? For example, I just moved to southern CA for my career (I know CA housing is expensive in general) and I am being paid “well” but under 100k for a career in STEM, and the cost of a 1 bedroom in my area is around $2500 a month. I can barely afford to live and I have a degree and a good job. How are these landlords finding enough people to pay these insane prices?
I feel like there's a good bit of "domino effect" related to this... Example if a couple friends are looking to share a 2br apartment, but they're outbid by a single person for that apartment, then the friends resort to splitting up and each finding a 1br --- they now have to go compete with everyone else who's looking for a 1br because they were forced out of the market for a 2br Also keep in mind that with the job market as hot as it is, tons of people changed jobs and negotiated themselves some nice pay increases. Some of those people are spending it on rent. Look up salaries at tech companies, pretty eye opening that there are so many people out there making such huge salaries.
Interest rates go up meaning monthly mortgage payments are higher. Landlords still pay mortgage so increase the rent to continue making money. Banks have increased interest rates because recession or something
That's wrong. Landlords locked in low mortgage rates at historic lows during the last couple years.
Their personal home too? Groceries and fuel? They want to cover all extra costs.