HOMEOWNERS’ FEARS that the recession caused by covid-19 would bring down house prices have not been borne out. Low interest rates have kept the rich world’s housing markets bubbling. In America’s biggest cities, prices were 5.2% higher in August than a year before, according to Standard & Poor’s Case-Shiller index. For Americans who rent rather than own, however, the pandemic has been less benign.
The researchers examined price and occupancy data on 12.6m rental apartments from CoStar, a property-research company. Over the past decade, the rent charged on apartments has increased by around 2% a year on average, regardless of the type of property. The pandemic has made that growth more uneven. In the summer average rents shrank, compared with a year earlier, for the first time in more than a decade . That was because the poshest pads became cheaper.
The decline in rents for the smartest properties reflects a softening in demand. This summer vacancies in high-density urban areas such as Manhattan rose by three percentage points on average compared with a year earlier. This may in turn reflect new ways of living. With offices, bars and restaurants shut, city life, and the accompanying expense, has lost its lustre. Working from home has prodded people to reconsider where they want to live.
People trying to save money on rent may struggle to find cheap places to live. The authors note that the number of properties in America available to rent for under $600 a month fell by 2.5m between 2004 and 2019, whereas those costing at least $1,000 a month rose by 10.4m. The pandemic has only made the search for an affordable home harder.
One of my pet peeves in housing discourse is how every conflict is the result of substitutions between markets but every argument assumes substitutions don’t exist. This is a good example. 1/
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