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Meta Description: Discover the challenges of inflation for renters and property managers, from rising rents to hefty security deposits, and learn how Standby.io offers a viable, financial relief alternative.
The signs of inflation creep into people's everyday lives subtly, right down to the cost of eggs at the local grocery store. But, there are also more significant and lasting effects for many, like people's ability to buy homes. In a high-interest market that piles on the financial pressure for families, more people are renting versus owning. The growing demand is increasing heat for landlords looking to fill vacancies, which makes it a competitive market. However, the growing demand and skyrocketing costs make it harder for property managers and renters to negotiate affordable leases, which may lead to difficulties with dampened demand.
How Inflation Affects the Demand for Rental Properties
During high inflationary periods, more people find it difficult to get a mortgage for a new home. Interest rates for mortgages and home prices are at an all-time high, and buyers are realizing the limits of their home budgets. As a result, more potential first-time home buyers are continuing to rent as they wait out a dip in the market. These market conditions have built a surge in demand for rental properties and fueled rent increases across the country.
While property managers increase their rental rates, renters are dropping their leases because of financial pressures. Renters have piled on renter debt as rental prices increase year-over-year. When renters can no longer afford their leases, vacancies and evictions become more common. Renters are also less likely to afford a hefty security deposit at lease signing, which can drive vacancies up for landlords.
National Rental Rates are Increasing
Even though renting in the United States is cheaper on average than buying a home, families still feel the burden of higher rent prices that outpace their incomes. Between 2020 and 2021, rental rates increased 6% while wages grew 4.5%. More American families face housing insecurity because of higher rent prices that they can't maintain.
As renters renew their leases, fewer families can afford to remain in their current homes because of increases in rental rates. 50% of households spend 30% or more on housing. An inability to renew results in higher vacancies, causing stress for families who rent and have to move and for property managers trying to fill their spaces. Despite the high demand for rentals, renters need help to afford leases.
Renter Debt is On The Rise
During the pandemic, eviction moratoriums prevented property managers from evicting tenants. These moratoriums led to a rise in rent debt totals as time progressed. Now, three years post-pandemic, total rental debt totals in the US exceed $10.4 billion.
Renters and property managers feel the effects of higher costs in the rental market. As a result of inconsistent pay or income loss, a staggering 15% of renter households are currently behind on rent. While renting is the more affordable option between renting and owning a home in 2023, fewer people are keeping up with the costs of their lease.
Steep Deposits May Deter Potential Renters
Given the outpaced income of renters in the US compared to the average rental price, fewer people can afford a hefty security deposit at lease signing. Many landlords need a security deposit of one or even two months' rent plus the first month's rent before signing a lease. Security deposits can make potential renters think again about signing a lease.
As a property manager, collecting security deposits is an essential part of protecting your property against damages or missed rent. However, with the current state of the rental market, more and more renters are becoming hesitant to pay such a large sum upfront for a lease. Property managers who demand high upfront costs risk losing potential renters to competitors who offer more flexible payment options. It's essential to balance protecting your property and being mindful of the financial strain a security deposit can place on renters.
High security deposits can potentially disrupt the balance in the rental market. If a significant number of property owners set steep security deposits, it could drive up the average security deposit fee across the market, making it more challenging for potential renters to afford to move in. This situation could lead to a decrease in rental applications, leaving properties vacant for longer periods. Conversely, property owners who choose to maintain reasonable and competitive security deposits might find themselves at an advantage, attracting a larger pool of potential tenants and contributing to a more stable and attractive rental market.
Standby.io Can Help Manage Security Deposits for Renters and Build Cashflow for Property Managers
Rather than requiring an up-front security deposit at lease signing, property managers can accept a Standby Deposit that protects against losses from damage or missed rent. Standby Deposits depend on a renter's credit and keep more cash in their pockets to maintain their lease. Standby.io's platform has straightforward features that protect property owners and help renters find and keep their leases.
