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Soaring U.S. Rents Are the Sticky Inflation With Staying Power

  • Summer lease renewals will lock many into bigger monthly bills
  • Renter pain contrasts with wealth gains, refi boom for owners
New homes built by Pardee Construction LLC are seen in this aerial photograph taken over the Pacific Highlands Ranch master planned community in San Diego, California.
New homes built by Pardee Construction LLC are seen in this aerial photograph taken over the Pacific Highlands Ranch master planned community in San Diego, California.Photographer: Bing Guan/Bloomberg

The cost of renting a home is soaring in cities across the U.S., squeezing the finances of low-income households and posing a threat to the consensus that pandemic inflation will soon fade away.

The median national rent climbed 9.2% in the first half of 2021, according to Apartment List. While part of the increase reflects a bounce-back in prices that dropped earlier in the pandemic, the real-estate firm says rents are now higher than if they had stayed on their pre-Covid track.

And they’re still rising at a rapid clip -- just at the time of year when the largest number of lease renewals fall due, locking millions of tenants into bigger monthly bills. Surveys by the New York Fed and Fannie Mae suggest renters are braced for further hikes of 7% to 10% in the coming year.

Higher rents are the kind of price increase that’s hard to reverse -– unlike many of the ones that have accompanied the economy’s reopening, from lumber to used cars.

That means a sustained run-up in rents could represent a bigger challenge to the Federal Reserve’s view –- shared by most investors –- that the current spike in inflation will prove transitory.