According to Kriston Capps of Bloomberg, President Biden proposed national rent control to cap annual rent increases at 5% for landlords with over 50 units, threatening the loss of federal tax write-offs for non-compliance. This initiative aims to address high housing costs and improve Biden’s voter support but faces challenges in a GOP-controlled Congress and a closely divided Senate, according to Capps. The plan includes exemptions for new constructions and substantially renovated units and follows prior housing affordability measures by the administration. While some industry leaders criticize the proposal as ineffective, advocates like the National Low Income Housing Coalition view it as a crucial step against corporate rent gouging.

The White House released a fact sheet outlining the proposal, highlighting three key points of the proposal:

• Calling on Congress to pass legislation giving corporate landlords a choice to either cap rent increases on existing units at 5% or risk losing current valuable federal tax breaks;
• Repurposing public land sustainably to enable as many as 15,000 additional affordable housing units to be built in Nevada; and
• Rehabilitating distressed housing, building more affordable housing, and revitalizing neighborhoods, including in Las Vegas, Nevada.

Single-family rentals

For the fifth straight quarter, the annual increase in SFR operating costs met or exceeded the growth in rental rates, according to data from the National Rental Home Council’s (NRHC) Single-Family Rental Market Index (SRFMI) report. Published in collaboration with industry research firm John Burns Real Estate Consulting, the SFRMI includes data for nearly 300,000 single-family rental homes in 67 markets nationwide. 

Regarding rising operating costs, David Howard, CEO of NRHC, stated, “SFR providers of all sizes, large and small, are working incredibly hard to manage the economics required to operate and build rental housing in today’s market. Providers are facing unrelenting, and often unprecedented, increases in the underlying cost of virtually all aspects of the business, from operations to financing to supply chain to labor to regulations.”

Source: NRHC (July 2024)

According to a new report from CoreLogic, single-family rental gains were up by 3% in April from a year ago. Rent growth for attached properties (such as condominiums) continues to decline, posting a year-over-year decrease of -0.5%. St. Louis led the country for annual rent growth at 6.3%. Molly Boesel, principal economist for CoreLogic, comments:

“Annual single-family rent growth has solidified over the past few months, increasing at roughly the long-term trend…However, monthly single-family rent growth gained momentum and was higher than usual for April. At the current rate, rents are poised to grow by roughly 3% through the end of 2024.”

Jeff Andrews of HousingWire comments on Zillow data showing that since March 2020, single-family rents have increased 39.6%. Nationally, rents rose by 4.7% in June compared to last year. This increase varies by metro area, with Austin being the only exception, experiencing a slight 0.6% rent decrease. Cleveland saw the largest year-over-year single-family rent growth at 8.9%.

Finally, ATTOM Data Solutions released its Q1 2024 Single-Family Rental Market report which identifies the top U.S. counties for investing in single-family rental properties. The analysis includes 341 counties with populations of at least 100,000. It examines median rents, home prices, and sales deed data. The average annual three-bedroom gross rental yield is projected to be 7.55% in 2024, up from 7.39% in 2023. This increase is driven by rents rising slightly faster than home prices in many areas.

Source: ATTOM (July 2024)

Inflation data

Fan-Yu Kuo of the National Association of Home Builders (NAHB) reports on inflation data showing an overall cooling of consumer prices. Both overall and core inflation slowed in June due to declining gasoline prices offsetting an increase in shelter costs. This is a dovish signal for future monetary policy following a downward revision to the job report. Despite a slowdown in the year-over-year increase, shelter costs continue to exert upward pressure on inflation, accounting for over 60% of the total rise in core inflation.

Source: NAHB (July 2024)

Ann Saphir and Howard Schneider of Reuters comment on the data, highlighting that the Federal Reserve’s battle to reduce inflation may have improved after U.S. consumer prices unexpectedly fell in June. This bolsters policymakers’ confidence that they are winning the fight. The consumer price index slid 0.1% last month after remaining unchanged in May. Over the last three months, consumer prices have risen just 1% on an annualized basis.

Sam Goldfarb and Nick Timiraos of the Wall Street Journal report that there is now more optimism for a rate cut. The data suggests a potential interest-rate cut in September as the labor market slows and risks further weakness. The Fed is not expected to lower rates at its next meeting and has not publicly rallied a consensus for such a move.

That said, Jesse Pound of CNBC reports that Federal Reserve Chairman Jerome Powell commented recently he will not wait until inflation hits 2% to begin cutting interest rates. Specifically, Powell noted: “The implication of that is that if you wait until inflation gets all the way down to 2%, you’ve probably waited too long, because the tightening that you’re doing, or the level of tightness that you have, is still having effects which will probably drive inflation below 2%.”

Danielle Hale of Realtor.com comments on the data, noting that inflation risks still remain due to elevated shelter costs. Shelter inflation is slowing but still rose by 5.2% from a year ago. The slow pace of new-home construction and the housing supply deficit make it challenging for home shoppers. 

Real estate investors

Hannah Jones of Realtor.com released an Investor Report last week revealing that investor buyer activity accounted for 14.8% of home purchases in Q1 2024, the highest level ever seen. “Though investors took a bigger piece of the pie than in any other quarter, the pie was much smaller. Overall home sales fell to the lowest level in more than a decade, led by a decline in non-investor purchases. Investors purchased roughly the same number of homes as in the first quarter of 2023, while non-investor purchases fell 6.1% year-over-year.”

Further, smaller investors made up 62.6% of purchases, the highest share on record, as larger investors pulled back amidst higher rates. “Small investors not only grew in share of investors but also picked up 6.4% more properties compared to the previous year, while medium and large investor purchases fell by 3.8% and 13.9%, respectively.”

Source: Realtor.com (July 2024)

This comes amidst improving housing sentiment, according to new data from Fannie Mae. The Home Purchase Sentiment Index (HPSI) rose by 3.2 points in June to 72.6, bouncing back from last month’s decline. In June, 19% of consumers said it was a good time to buy a home, up from 14% in May, while the percentage of people who believed it was a good time to sell also increased from 64% to 66%. Moreover, more consumers anticipate that home prices and mortgage rates will increase over the next 12 months. 

According to new data from Lily Katz and Sheharyar Bokhari of Redfin, apartment construction is dropping significantly. Developers have obtained permits to build 13 multifamily units per 10,000 people so far this year, down from an average of 18 in 2021-2023. They’ve slowed down construction due to high borrowing costs and an influx of new units entering the market, which is curbing rent-price growth. Cape Coral, FL, is permitting more multifamily housing than any other place in the U.S., with Austin ranking second. Rents are currently declining in many of the areas where multifamily construction surged during the pandemic.

New data from Zillow highlights that the slowdown in rent growth may have ended. Rental prices are increasing at their fastest annual pace in nearly a year, although the margins are small. The incentives offered by landlords and property managers have leveled off after reaching a three-year high this spring. Annual rent growth accelerated in June, with the average rent across the U.S. rising to $2,054, marking a 3.5% increase from last year, the fastest growth since last July. Monthly rent growth in June was about average for this time of year, with a 0.5% increase compared to the pre-pandemic average month-over-month change for June of 0.6%. 

Redfin also reports that lower rates and rising supply could mean more options for those looking to acquire property in the coming months. Specifically, a buyer with a $3,000 monthly budget can afford a home worth $447,750 with today’s daily average mortgage rate of 6.85%. This represents an increase in purchasing power of $22,250 compared to April, when the average rate was 7.5%, allowing them to buy a home worth $425,500.