By Shereen Siewert
Monthly rent in Wausau has risen sharply this month, weighing on households, fueling overall inflation and forcing many residents to reassess their living situation.
Over the past month, the average rent for a one-bedroom apartment in Wausau has increased 40% to $830, and the average rent for a 2-bedroom apartment has increased by 5% to $1,099 , according to data released Monday by Zumper, a rental marketplace website. The surge in prices has been fueled by growing demand across the metro area which has diminished an already low supply of multi-family housing, still awash with labor and supply shortages delaying new construction.
Katie Thomas, a single mother who graduated with a bachelor’s degree in finance in 2020, said she was already spending more than half her earned salary at a local bank on rent payments when she was told in December that her rent would increase on February 1. The extra $200 a month seems out of her reach, but Thomas said she couldn’t find suitable housing for less than $1,250, the amount she will pay when renewing her lease.
“I already work full time,” Thomas said. “With a daughter at home, anything I would earn from a second job would be eaten up by childcare costs. Right now I just feel helpless, like things will never get better for us.
Wausau is not alone in seeing such a dramatic increase. Rents have risen 12% in the past year nationwide, a rise that economists say is enough to wipe out any modest increases most people have gotten on their paychecks. The most recent data from the Bureau of Labor Statistics shows that Wausau residents have seen their wages increase by about $100 a week over the past year, but the increase in the metro area is significantly lower than that of the metro area. residents of Wisconsin.
The problem is compounded by additional demands that strain budgets, such as higher heating bills, higher home insurance premiums, and a car market in which the cost of a used car can be higher than that of a new car. And when people start paying more than half their salary in rent, they have no money left to reinvest in the local economy by visiting restaurants or attending events, said Kristen Euretig, financial planner certified and founder of Brooklyn Plans. This, Euretig said, can lead to credit card debt.
Many factors are behind the spike in rents, including a housing shortage. Tenants who stayed with family members at the start of the pandemic are now generating new demand for apartments, while landlords who gave new tenants reduced rents or forgave missed payments seek to recoup their losses. . Rental demand is also soaring due to high prices in the sale market, up almost 20% year-on-year.
Economists say that when rent goes up, it rarely goes down, especially when apartment occupancy rates also spike. In 2020, Wausau saw a slight drop in apartment rental costs, and the apartment vacancy rate increased to about double what it is today.
Economists say rising rent prices will be a major driver of inflation in 2022. Housing costs make up about a third of the US consumer price index, which uses the current rate of rent as the main calculation. With a lag of 9 to 12 months before rising rents show up in inflation measures, these higher rental prices could keep inflation high throughout the year, said Frank Nothaft, chief economist at real estate data firm CoreLogic.
Like Thomas, about one in four renters spend more than half their monthly income on rent, according to an analysis by the Harvard University Joint Center for Housing Studies. Experts say that because the most recent data, from 2018, is pre-pandemic, the figure is likely even higher.
For years, economists have recommended spending no more than 30% of income on rent. But this rule of thumb disappears when prices rise so quickly. The rule was a calculation rooted in the 1969 council housing regulations.
“Even before the pandemic, rent prices were quite high there,” said Jung Choi, senior research associate at the Urban Institute’s Housing Finance Policy Center. “The pandemic has only made things worse.”
But for some people already living in high-rent areas who are working remotely, Wausau’s rental chart seems reasonable, even without the amenities a big city can offer. Rowan Flynn, a 25-year-old Wausau native living in Salt Lake City, said he was seriously considering moving back to the area after learning his monthly rent of $1,750 for a one-bedroom apartment would go up $250. dollars in March.
“Still, rent prices in Wausau aren’t as low as in Salt Lake City and there’s a lot less going on,” he said. “I don’t know if I can understand that.”
Financial experts say they don’t expect an end to rising house prices any time soon. The Federal Reserve Bank of New York said in a study released in November that Americans on average expect rents to rise more than 10% over the next year, the highest figure in the survey history.
“We could face an economy a year from now where some of the supply chain disruptions will ease [and] price growth will subside,” Robert Dietz, chief economist for the National Association of Home Builders, told Politico. “But housing is likely to be where we’re going to continue to see cost growth, and that will have an impact on households.”