It’s hard to imagine rent in 2022 rising any faster than it did last year, as 2021 experienced the most rent growth in any calendar year since Zumper began collecting rental data in 2014—and likely well beyond. And yet, the economic fundamentals that drove rent up in 2021 are still present as we begin 2022. Could rent growth in 2022 match or even surpass 2021?
In Zumper’s 2021 Annual Report, a staggering 81.6 percent of respondents said they plan to move in 2022, suggesting the wave of domestic migration set off by the COVID-19 pandemic is far from over. To find out more about their intentions, Zumper ran a new survey in February that polled renters who planned on moving this year.
When asked which type of housing they plan on moving into, 41.7 percent of respondents said they intend to buy a home. This is significant because rising home prices are a big reason why rent has been rising, as it prices out renters who would otherwise be shuffling out of the rental market. The renters who can afford to buy tend to have higher incomes relative to other renters, so as more and more of these households build up in the rental market, it drives up rent.
If the 41.7 percent of renters who plan to move are actually able to buy a home, it would alleviate a lot of the upward pressure on rent. But that’s a big if; the investment bank Goldman Sachs has forecasted home prices will rise another 16 percent in 2022, which will price out more renters and keep them in the rental market. The Federal Reserve has also made clear it plans to raise interest rates, which will make the cost of borrowing with a mortgage more expensive.
Contrary to the long-distance moves that have characterized much of the post-pandemic migration, renters don’t appear to be moving very far in 2022—39.3 percent plan on moving within the same city, and another 28.5 percent plan on staying within the same metropolitan area. When asked if they were moving to an urban, suburban, or rural area, 51.5 percent said they are not moving to a different type of area. However, 19.3 percent said they are moving from an urban to a suburban area, a trend that pre-dates the pandemic, although 8.8 percent said they are moving from a suburban area to an urban area.
The survey data show that demand for housing is still strong, if slightly different from earlier in the pandemic. On the supply side, rental occupancy rates are currently at record highs, which means there are very few rental vacancies for all the renters looking to move. This has generated bidding wars for rentals in markets where it was previously unheard of. If renters follow through with their plans to move, occupancy rates will drop a bit as people leave apartments to find new ones.
But supply will remain tight. The chronic housing shortage that began in the aftermath of the financial crisis in 2008 won’t be solved overnight. Although, there are indications that more new rental inventory will come online in 2022 than in previous years. Add low supply to strong demand, and it’s likely 2022 will again experience rapidly rising rent.
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