From xxxxxx <[email protected]>
Subject Skyrocketing Rent Is Driving Inflation
Date June 22, 2022 2:10 AM
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[But one of the biggest drivers of inflation, at least according
to the most recent Consumer Price Index report, has not elicited even
a peep from the political class: the soaring cost of housing. ]
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SKYROCKETING RENT IS DRIVING INFLATION  
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Alexander Sammon
June 21, 2022
The American Prospect
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_ But one of the biggest drivers of inflation, at least according to
the most recent Consumer Price Index report, has not elicited even a
peep from the political class: the soaring cost of housing. _

Housing rights activists held a die-in in front of Speaker Carl
Heastie and Majority Leader Andrea Stewart-Cousins’s New York City
offices, May 27, 2022, calling on state officials to pass good cause
housing legislation., Karla Ann Cote/NurPhoto via AP

 

Democrats, we are told to believe, are very serious about inflation.
The Biden administration has said
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it will “give the Fed the space and the independence to do its
job,” namely to hike rates by historic amounts, risking the
degradation of a robust job market and the inducement of a recession,
despite little indication that the interest rate will fix supply chain
problems. When gas prices surged, House Democrats came together to
pass the Consumer Fuel Price Gouging Prevention Act, and last week,
the Lower Food and Fuel Costs Act
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When airline tickets soared in cost, Transportation Secretary Pete
Buttigieg hauled the CEOs of the major airlines to a meeting for
questioning (though doing anything about it
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is another matter). It’s been reported that the White House is
considering
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Americans rebate cards to defray soaring energy prices.

But one of the biggest drivers of inflation, at least according to the
most recent Consumer Price Index report, has not elicited even a peep
from the political class: the soaring cost of housing. According to
the breakdown of services, the cost of shelter
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outpacing airline tickets, as well other services combined, as a
primary driver of inflation. In fact, as the Council of Economic
Advisers reported, increase in rents was responsible for almost 40
percent [[link removed]]
of the core CPI number in May. Worse still, the shelter index’s 0.6
percent increase in May marked the largest monthly increase since
March 2004, according to the Bureau of Labor Statistics
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increase is the largest since February 1991.

At least 35 percent of Americans are renters, and anyone who has moved
recently or whose landlord has reset the price is feeling the squeeze.
According to a recent report from Redfin
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national median asking rent was $2,002 in May, the first time it has
ever eclipsed the $2,000 mark. That represented a 2 percent gain from
April, and a stunning 15.3 percent rise year over year. Both rent and
owners’ equivalent rent—the amount of rent
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have to be paid in order to substitute a rental property for a
currently owned house—are on a historic inflationary tear. These are
the two major factors that the BLS uses to calculate shelter costs,
and they are not slowing down.

Yet relief for renters and protection from skyrocketing housing costs
has remained curiously absent from Democrats’ messaging on
inflation. “There are three major things you can do to combat those
rental costs, and nobody has done any of them,” said Paul Williams,
a fellow at the Jain Family Institute who focuses on housing. “You
can give people more money by making vouchers an entitlement, you can
build more housing, or you can pass rent regulations. None of those
are happening and it’s chaos.”

Indeed, there has been no national discussion of anything like rent
control, or a voucher program to give cash assistance for rent relief.
Meanwhile, rising interest rates have resulted in a surge in the cost
of a mortgage. This not only discourages people from buying homes, it
subsequently discourages new construction that might help increase
supply and drive down costs.

                 For many, the crisis in housing costs
has only just begun.

The Build Back Better Act, now defunct, actually featured meaningful
solutions
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that might have blunted the sharpest edges of this crisis. Nearly all
the housing investments that were included in the BBB draft were
counterinflationary, from the funding of housing trusts to the support
of low-income development to expansion of vouchers. Of course, there
has been no indication whatsoever that the housing package might find
its way into the revived, pared-back Build Back Better that has been
rumored to be under negotiation.

It’s not just congressional Democrats falling down on the job. New
York state’s Democratic supermajority just days ago failed to pass a
good cause eviction bill
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that had been under consideration since 2019. The bill would have
guaranteed lease renewals and restricted rent increases to 3 percent
per year or by tying them to inflation, and would have done well to
dent extreme rental increases being seen in places like Manhattan. The
bill failed thanks in part to a lobbying effort and millions of
dollars from landlord groups, and despite a frenzy of New York rental
horror stories that have dominated local media.

There’s plenty of reason to believe the rent crisis is actually
worse than the BLS data indicates. Because rents are often tied to
12-month contracts, those trends can be slower to surface, as
they’re only enacted once contracts come up for renewal. “Roughly
every month only 10 or 12 percent of people surveyed in these CPI
reports are those who have just signed a new lease,” said Williams.
Evidence of the ubiquity of those increases can be delayed, then,
before they show up in the official CPI number. The result is that the
current figure is likely artificially muted, and will continue to go
up for months to come, as the data catches up with the reality on the
ground. Indeed, rents rose in 2021
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but that fact did not even register in inflation data until earlier
this year; it can take up to 12 months
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before official inflation numbers catch up to rent hikes
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_Fortune_’s Tristan Bove noted
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There are other reasons to believe those figures will continue to get
worse as well. While small and midsized cities saw their rents
skyrocket as remote workers fled expensive metropolises like San
Francisco and New York during the early months of the pandemic, that
migration has begun to reverse. With companies calling their workers
back to the office, people have begun to return to large cities.

Those places, in turn, have recently seen rents soar off of their
pandemic lows. And because those cities have the highest population
numbers, they account for a larger percentage of the rental
population. “I think that rent in the CPI still has a ways to go up
because these big cities are going to start going up more, and they
have a higher weight in the way CPI is calculated, because they have
more people,” added Williams.

After experiencing a ton of difficulty getting the rental relief
program of the American Rescue Plan Act started, that aid did end up
making a huge difference
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for renters nationwide. Over five million
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households received emergency rental assistance between January 2021
and March 2022. That financial assistance likely played a key role in
preventing a surge in evictions
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after the national eviction moratorium lapsed in August 2021, though
getting a clear sense of that situation has been hobbled by the fact
that the federal government doesn’t track evictions
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But those programs have long since been depleted of funds, and for
many, the crisis in housing costs has only just begun. With no
national push to renew a broader voucher program, and a Democratic
leadership class well into its eighties, there are plenty of
homeowners and landlords and few renters with a front-row sense of the
immediacy of this crisis. Meanwhile, young people, whose alienation
from the Democrats in power has been shown in countless polls, are the
ones feeling the brunt of the pain. The same is true for Black and
Hispanic Americans, who are more likely than their white counterparts
to rent.

For many renters, especially those in large, urban areas with public
transit that happen to be dominated by Democrats, increases in housing
costs are likely to be far more expensive and pressing than the price
at the pump. Yet there remains little willingness to address this
component of inflation head-on.

Read the original article at Prospect.org.
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* Cost of Housing; Inflation; Rental Housing;
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