Housing and Renting Costs Skyrocketed After the Pandemic

Following the pandemic, there has been a notable upward trend in housing and renting costs in many regions. The combination of various factors, including increased demand for housing in suburban areas due to remote work opportunities, a surge in the real estate market, and limited inventory, has contributed to the escalation of prices. Additionally, government interventions aimed at protecting tenants during the pandemic might have inadvertently impacted landlords and property owners, leading to higher rental costs to compensate for potential financial losses.

As the economy recovers and consumer confidence improves, the sustained growth in housing and rental costs post-pandemic suggests a challenging landscape for individuals seeking affordable options and raises concerns about affordability and accessibility in the long term.

Housing Costs

As the economy in every state, county, and city differs we’re going to specifically look at southern California as it’s a perfect extreme scenario. For example, the counties we’re going to be looking at are Los Angeles County, Ventura County, and San Bernardino County. In these three counties you can easily see a stark difference in housing costs including single family homes, condos, and townhomes. Here are a few that have been found on Redfin.com:

1. Los Angeles County
   1. Home: 3 bedroom and 2 bathroom House in Van Nuys totaling 1,670 sq/ft has increased:
      1. From $729,000 in 2019
      2. To $1,200,000 in 2023
      3. Total of 64% increase and $471,000 change (4 years)
   2. Condo: Studio and 1 bathroom Condo in Sherman Oaks totaling 475 sq/ft has increased:
      1. From $295,000 in 2019
      2. To $399,000 in 2023
      3. Total of 35% increase and $104,000 change (4 years)
2. San Bernardino County
   1. Home: 4 bedroom and 2.5 bathroom House in Coltan totaling 1,400 sq/ft has increased:
      1. From $235,000 in 2015
      2. To $525,000 in 2023
      3. Total of 123% increase and $290,000 change (8 years)
   2. Condo: 2 bedroom and 2 bathroom Condo in Highland totaling 950 sq/ft has increased:
      1. From $53,000 in 2012
      2. To $259,000 in 2023
      3. Total of 388% increase and $206,000 change (11 Years)
3. Ventura County
   1. Home: 3 bedroom and 2 bathroom House in Agoura Hills totaling 1,030 sq/ft has increased:
      1. From $369,000 in 2016
      2. To $615,000 in 2023
      3. Total of 66% increase and $246,000 change (7 years)
   2. Condo: 3 bedroom and 2 bathroom Condo in Agoura Hills totaling 1,070 sq/ft has increased:
      1. From $360,000 in 2018
      2. To $475,000 in 2023
      3. Total of 31% increase and $115,000 change (5 years)

Now from the lists above we can see a stark difference between the earlier years of 2012 to 2016 compared to the later years of 2018-2019. Prices have definitely risen ever since the housing market crash of 2008. Since the 2012-2016 range of price difference we can see a general change between 60% to 400% increase in housing prices. However, the best numbers we can see for the pandemic change is the 2018-2023 years. In the newer years previously before the COVID-19 pandemic we can see a price increase from 30% to 60% increase in housing prices.

Essentially after the housing market crash prices have risen astronomically, but that includes up to 8 years of difference. Now in the previous 4 years during the COVID-19 pandemic housing has risen even faster with a 30% to 60% increase in the matter of 4 years which house prices have already risen in the previous 8 years. This means that in the past 12 years since 2011 housing has become even more expensive with a huge push during the pandemic which occurred from 2020 to 2022.

Renting Costs

During the period from 2012 to 2016, renting costs experienced a gradual yet steady rise in many parts of the world. One of the primary drivers of this trend was the aftermath of the global financial crisis in 2008. As economies slowly recovered, more people turned to renting rather than homeownership, leading to increased demand for rental properties. Demographic shifts, such as millennials entering the housing market also influenced renting costs. This generation often sought flexibility and mobility in their living arrangements, contributing to the demand for rental properties. As a result, landlords could command higher rents, leading to an overall increase in rental costs during this period.

The period from 2018 to 2021 witnessed a continuation of the upward trajectory in renting costs. However, this phase was characterized by more pronounced fluctuations in different regions due to specific economic events and market dynamics. The pre-pandemic years, especially in 2019, saw a robust housing market with low mortgage rates and a surge in housing demand. The demand for rental properties remained high, fueled by factors such as affordability challenges in the homebuying market and shifting lifestyle preferences.

However, the onset of the COVID-19 pandemic in 2020 disrupted the rental market. During the initial phases of the pandemic, there was a temporary slowdown in rental demand as job losses and economic uncertainties affected tenants’ ability to pay rent. In response, some landlords offered rent concessions or deferred payments to retain tenants, which may have partially offset the overall growth in renting costs during this specific year.

The pandemic’s later stages and the subsequent economic recovery brought about increased demand for housing, including rentals. As vaccination efforts progressed and restrictions eased, the rental market regained momentum, resulting in a renewed surge in renting costs in 2021. The sustained increase in renting costs from 2012 to 2016 and 2018 to 2021 has significant implications for renters. Affordability has become a pressing concern for many individuals and families, especially in high-demand urban centers. Rent-burdened households face challenges in meeting other essential expenses and saving for homeownership, exacerbating wealth inequality.

• Rent increases:
  • California has seen an average rent increase percentage of 13.5% from 2021 to 2022
  • California has the most cities in the world with the highest costs of rent
  • Highest rental cities in California include the following:
    1. Palo Alto – Average of $4,819
    2. Oakland – Average of $4,398
    3. San Francisco – Average of $4,251
    4. Santa Monica – Average of $4,038
    5. Redwood City – Average of $3,920
    6. San Diego – Average of $3,917
    7. Glendale – Average of $3,805
    8. Sunnyvale – Average of $3,763
    9. Aliso Viejo – Average of $3,739
    10. Newport Beach – Average of $3,732
    11. Alameda – Average of $3,693
    12. Mountain View – Average of $3,633
    13. Milpitas – Average of $3,600
    14. Los Angeles – Average of $3,474
    15. Ventura – Average of $3,434
    16. Fremont – Average of $3,395
    17. San Jose – Average of $3,358
    18. Santa Clara – Average of $3,333
    19. Irvine – Average of $3,332
    20. Dublin – Average of $3,309
    21. Costa Mesa – Average of $3,279
    22. Pasadena – Average of $3,274
    23. Camarillo – Average of $3,244
    24. San Mateo – Average of $3,192
    25. Burbank – Average of $3,173

Others which were not mentioned can include Oxnard, Huntington Beach, Lake Forest, Santa Clara, Pomona, Riverside, Mission Viejo, Rancho Cucamonga, Chino Hills, Moreno Valley, and more. It can easily be seen that the average rent in these areas is very high and consider this isn’t just 1 bedroom homes. This is the average of all the renting properties in the areas listed above. The price has easily outweighed the increase of wages over the years and California is easily one of the highest costing areas in the United States. It’s crucial to state that Florida is also growing very heavily and has had the highest increase of rental properties in 2021-2022. Florida has seen an average increase in rent change of 22% from the past two years and more people are moving over.

The Future

If housing costs and renting costs continue to increase, several theoretical consequences may arise:

1. Housing Affordability Crisis: A sustained increase in housing and renting costs can lead to a severe affordability crisis, making it increasingly challenging for individuals and families to afford decent homes. Rent-burdened households may struggle to meet other essential needs, such as healthcare, education, and savings for the future.
2. Displacement and Homelessness: Escalating costs could force some individuals and families out of their homes, leading to increased displacement and potential homelessness. Those who cannot afford rising rents may face eviction, particularly in areas with limited tenant protection laws.
3. Migration and Urban Sprawl: As costs become prohibitive in urban centers, people may seek more affordable options in suburban or rural areas, leading to increased urban sprawl and longer commute times. This, in turn, can strain infrastructure, impact the environment, and alter the dynamics of communities.
4. Reduced Consumer Spending: High costs can eat into disposable incomes, reducing consumer spending on other goods and services. This can have ripple effects on local businesses and the overall economy.
5. Wealth Inequality: Increasing costs can exacerbate wealth inequality, as homeownership becomes even more inaccessible for low and middle-income individuals, limiting their ability to build equity and generational wealth.
6. Social Disparities: Rising housing costs may disproportionately affect vulnerable populations, such as low-income families, minorities, and younger generations, widening social disparities and perpetuating cycles of poverty.
7. Demand for Rental Assistance: As rents increase, the demand for rental assistance programs may also surge, putting additional pressure on government resources and social safety nets.
8. Policy Responses: Escalating housing costs may prompt governments to introduce policies aimed at addressing affordability, such as rent control, affordable housing development incentives, or financial assistance programs. However, these policies can have both positive and negative effects on the housing market and must be carefully balanced to avoid unintended consequences.
9. Impact on Homeownership: High rental costs can make it difficult for individuals to save for a down payment, potentially delaying or preventing homeownership aspirations.
10. Impact on Economic Growth: Escalating costs can affect labor mobility and workforce productivity. If employees struggle to find affordable housing near their workplaces, businesses may face challenges in recruiting and retaining talent.

The actual outcomes may vary depending on various factors such as regional economic conditions, government policies, and the overall housing market dynamics. Policymakers and stakeholders must closely monitor these trends and work towards finding balanced and sustainable solutions to address affordability and ensure accessible options for all. It’s also notable to include the fact that not every State has high rent or housing costs associated with the States. Some individuals may decide to leave their high costing States into others that are more affordable. For example, may Californians have moved to Texas as the housing costs are substantially lower in the State and Texas has no income tax.

The relationship between wages and the costs of homes and rent can vary significantly depending on the region, economic conditions, and specific time periods. In general, housing costs, including both home prices and rental costs, have outpaced wage growth in many areas, leading to housing affordability challenges for many individuals and families.

Conclusion

Following the pandemic, housing and renting costs have experienced a notable upward trend in many regions worldwide. The combination of various factors, such as increased demand for housing in suburban areas due to remote work opportunities, a surge in the real estate market, and limited housing inventory, has contributed to the escalation of prices. Additionally, government interventions aimed at protecting tenants during the pandemic may have inadvertently impacted landlords and property owners, leading to higher rental costs to compensate for potential financial losses.

Looking specifically at Southern California, which serves as an extreme example, we analyzed housing costs in Los Angeles County, Ventura County, and San Bernardino County. The data reveals a stark difference between the earlier years of 2012 to 2016 and the more recent years of 2018 to 2023. Since the housing market crash of 2008, prices have risen astronomically, but the increase has been even more significant during the pandemic. In the past 12 years since 2012, housing has become even more expensive, with a considerable push during the COVID-19 pandemic.

Similarly, renting costs experienced steady growth from 2012 to 2016 and a continuation of the upward trajectory from 2018 to 2021. The pandemic temporarily disrupted rental demand, but as the economy recovered, renting costs surged in 2021.

If housing and renting costs continue to rise, theoretical consequences could include a housing affordability crisis, increased displacement and homelessness, migration to more affordable areas, reduced consumer spending, worsened wealth inequality, and amplified social disparities. The demand for rental assistance might increase, leading to potential strains on government resources. Policymakers and stakeholders must closely monitor these trends and work towards finding sustainable solutions to address housing affordability and accessibility for all.