How Is Inflation Affecting Landlords and the Rental Property Market? | LawDistrict (2024)

If you are currently a homeowner or planning to become one, it is essential to prepare yourself for what the current and future housing market has in store for you.

That is especially true if you would like to create a lease agreement and rent out your home.

All over the country, housing costs and rental prices are rising for various reasons. Depending on the location of your property, you may have higher housing costs compared to other parts of the country.

The increase in prices is happening for different factors, arguably the most critical reason being inflation.

Inflation is a problem worldwide due to the economic recovery from the COVID-19 pandemic and the Russian invasion of Ukraine. In certain cities around the country, it seems that rental prices just won’t stop increasing.

This issue is forcing landlords to issue eviction notices to tenants who are failing to pay their rent.

Based on the number of downloads of our eviction notice templates during the last quarter of 2021, there was a 14% increase in eviction proceedings compared to the same period in 2020.

Do the rising rental prices mean it is impossible to stay or become a property owner?

By using a survey and data from the downloads of our real estate documents, we have found the following information:

• Rising rental prices are affecting certain areas of the country more than others
• There is a correlation between inflation and rising rental prices
• There is a correlation between rising prices and eviction rates

As a property owner, it will be essential to understand what the consequences of inflation are on the market and where it is most affected.

Keep reading to get the critical information you need to prepare yourself for the rising housing costs and what you can expect from the rental market in 2022 and 2023.

How Inflation Affects Property Owners

Inflation is when a currency’s purchasing power declines over a certain period. In other words, most things you pay for, such as groceries, gas, and rent, become more expensive.

As a landlord, you can raise the rent as inflation rises (with sufficient notice), which allows you to meet rising housing costs. If your costs go up, you can raise the price of your rental property to balance those costs out.

You may also benefit from the demand for rental units and increase your price. However, thanks to inflation, workers are having trouble making enough to pay a much higher rent.

According to the realdeal.com, you may need to make concessions with your tenant(s) regarding the current or future rent. This is especially true for landlords in large cities like New York or Miami.

However, these rising costs are impacting the rental market in every part of the United States.

The median rent in the United States rose tremendously in 2021 and remained high in 2022 based on data from Statista.

For example, The median monthly rent for a 2-bedroom apartment rose from $1,105 in August 2020 to $1,250 in August 2021.

Inflation was the main cause in certain areas around the country for this rise in rent.

Which States have the Highest Inflation in 2022

Since 2015 rental prices have increased tremendously, and even more so over the past 12 to 14 months. These rising rental costs go hand in hand with inflation, which has also been increasing over time.

Some states are experiencing far worse inflation than others.

As seen in the map below, the inflation rate is a factor in the rising costs of renting properties. States with a lower score are experiencing a higher impact of inflation.

Not every state with high inflation is experiencing a hike in rental prices. However, in the south and southeast parts of the country, there has been both a hike in the inflation rate and housing costs.

There has been a 14.2% increase in household prices for the Southeast United States since January 2021, which is higher than the U.S. average of 13.9%, according to the United States Congress Joint Economic Committee.

In general, the property markets in the southern United States have seen the largest increases in inflation; based on research from Merchant Maverick, the most affected states are:

• Alabama
• Arkansas
• Florida
• Georgia
• Louisiana
• Mississippi
• Oklahoma
• South Carolina
• Tennessee
• Texas

The Southeast has seen a general growth in the amount of rent increase letters and eviction notices delivered to tenants, along with high inflation rates and an increase in rental prices.

This begs the question, why is inflation hitting the South the hardest?

According to the U.S. Census Bureau, the states in the south have a high sales tax and a lower median household income than the North and West.

The region’s lower income is contributing to the housing market and rental property market’s current dilemma.

Rent price increase by state

Based on data from Apartment List, the sharp rise in the annual change in median rent across the country is clear starting in 2021.

In general, the growth in prices is occurring all over the United States, especially in major cities such as New York City, and in the South and South Eastern parts of the country.

Many southern cities have seen rent increases above the U.S. average.

We have examined some cities in the region and their above-average rental hikes.

Based on LawDistrct’s data, states such as Florida and Georgia have seen a growth in the number of eviction notices downloaded.

However, the increase in evictions is not only happening in the South, but across the entire country.

Does Inflation Affect the Number of Evictions?

Now that there are fewer COVID-19-related protections in place, landlords can file eviction notices when they feel it is necessary.

With the current inflation rates, tenants are struggling to pay their rent on time, and without protection, there has been an increase in eviction notices.

We surveyed landlords from the 10 states where inflation is currently most impacting, and it shows that the main reason for serving an eviction notice is unpaid rent.

While the rate of evictions and inflation may make it seem difficult to get into the rental market, there are solutions.

Rental Property Market Tips for Landlord

As evidenced by our data and surveys, it’s not as easy to be a landlord as in the past.

It’s essential to know what actions you can take to protect your rental property interests. Follow the tips below to ensure you receive your rent on time and have as little trouble with tenants as possible.

• Research government financial aid that could be provided to your tenant.
• Conduct a proper background and credit check before signing an agreement.
• Send a late rent notice to your tenant if they have not been paying rent.
• Send an eviction notice if your tenant refuses to pay rent.

Rental Property Predictions for 2023

While rental prices may continue to rise slightly throughout the end of 2022 and into 2023, the outlook is that many tenants will pay less as the new year continues.

As stated in the Q3 2022 Rent Growth Report found on Businesswire.com, many markets throughout the United States have already begun to see lower demand for rent during the 3rd quarter of 2022. With a lower demand for rental properties comes lower prices for tenants.

Certain cities that have increased their demand and prices for rent over recent years will expect to see lower numbers in both of these categories.

However, according to the U.S. Census Bureau, states that are experiencing heavy migration from other parts of the country, such as Florida, will probably remain with higher rental prices in 2023.