Higher rents after a brief COVID-19 pandemic slump, burdening households and fueling overall inflation, are bad news for the Federal Reserve, possibly making today’s uncomfortably rapid price gains last longer, the New York Times reported. They are also problematic for the White House because they hit households right in their pocketbooks, diminishing well-being and fueling unhappiness among voters. The jump in rents stemmed from a frenzy in the market for owned homes. People tried to buy as the pandemic took hold in the United States, often searching for extra space, but found that houses were in short supply after years of under-building following the housing crisis. That dearth of properties has been exacerbated by work stoppages, supply shortages and labor constraints during the coronavirus era, all of which have kept developers from ramping up production to meet demand. As buyers bid up prices on single-family homes and condominiums, many people who would have otherwise moved toward homeownership found themselves unable to afford it, increasing demand for apartments and home leases. Rents have been further boosted by the large number of people searching for places with more space and home offices during the pandemic, and as millennials in their late 20s and early to mid-30s look for more autonomy. Government stimulus checks and expanded unemployment benefits also helped people amass savings over the course of the pandemic, so they can afford to move. Personal savings as a share of disposable income popped during the crisis, and while the share has come down toward normal levels, it remains slightly elevated at 9.4 percent, compared with about 8 percent just before the pandemic. The combination of factors seems to have created a perfect storm that pushed the Consumer Price Index measure of rent up 0.5 percent just between August and September, the fastest pace in about 20 years. That’s a concern for the Fed, because housing prices tend to move slowly and once they go up, they tend to stay up for a while. Rent data also feed into what is called “owners’ equivalent rent” — which tries to put a price on how much owners would pay for housing if they hadn’t bought a home. Together, housing measures make up about a third of the overall Consumer Price Index.
