These are good times for U.S. landlords. For many tenants, not so much.
With demand for apartments surging, rents are projected to rise for a fifth straight year. Even a pickup in apartment construction is unlikely to provide much relief anytime soon.
That bodes well for building owners and their investors. Yet the landlord-friendly trends will likely further strain the finances of many renters. That's especially true for the 50 percent of them who already spend more than one-third of their pay on rent.
A 6 percent rise in apartment rents between 2000 and 2012 has been exacerbated by a 13 percent drop in income among renters nationally over the same period, says a report from search portal Apartment List, which used inflation-adjusted figures.
"That's what we call the affordability gap," says John Kobs, Apartment List's CEO. "I don't see that improving in the near future."
The trend is taxing the finances of tenants like Michael Strane, 39, who recently decided to move from his apartment in Pasadena, Calif., to cut his two-hour commute to work in half. His new apartment in the L.A. suburb of Whittier will cost him $1,045 a month, $200 more than he paid before.
"I'm actually paying more than I really feel comfortable paying right now," says Strane, a geologist.
Rental demand has risen in much of the U.S. since the housing market collapsed in 2007. A cascade of foreclosures forced many people out of their homes and into leases. At the same time, construction of apartments was stalled until the last couple of years because many builders couldn't get loans.
Add to that rising mortgage rates and stagnant pay, which have combined to discourage many people from buying homes. It's resulted in fewer places to lease and a bump up in rents.
The national vacancy rate for apartments shrank from 8 percent to 4.1 percent from 2009 to 2013, says commercial real estate data provider Reis Inc.
As a result, landlords were able to raise rents in many markets.
Even with more buildings under construction, rising demand will push rents up in many markets.
Reis expects a stronger job market to enable more people to start renting their own places instead of living with roommates or parents.
As a result, the firm predicts that effective apartment rents will increase 3.3 percent this year to an average of $1,118 nationally.
Higher demand and rising rents, unwelcome as they are for tenants, will produce more income for owners such as apartment "REITS."
These real estate investment trusts operate buildings they acquire or build.