Renters are ‘finally catching a break,’ as rents see biggest drop in 3 years, Redfin says

Even though rent increases were one of the primary drivers for inflation rising 0.1% in November, most economists believe that the government’s read lags behind private-sector data. 

The median asking rent in November was $1,967, down 0.6% from the previous month, and down 4.2% from a record high in August 2022, when median rents hit $2,054. 

“Renters are finally catching a break,” Daryl Fairweather, chief economist at Redfin, said in a statement.

“Better deals are easier to come by because landlords are doling out concessions and rents have started falling in a meaningful way. Rising supply also means renters have more good options to choose from,” she added.

While rents are starting to drop, they’re still 22.1% higher than they were in November 2019, Redfin’s report noted.

With buying a home out of reach for many renters while mortgage rates remain over 7% and home prices remain elevated, “renting has started to lose its stigma,” Fairweather said. 

But don’t write them off as forever renters just yet, she stressed: “We may see more renters jump into the homebuying market next year as home-sale prices and mortgage rates tick down.”

Asking rents in November fell the most in the West, by 1.8%. The only region that continued to see rents grow was the Midwest, where they increased by 4.6% as compared to a year ago, to a median of $1,434.

The key factor causing rents to slow — and drop — is the increase in supply, according to Redfin.

The number of completed apartments in America rose 7% in the third quarter, as compared with the year before, Redfin said. With 1.2 million apartments completed, that’s one of the highest levels in the last three decades. 

Vacancies, as a result, rose to 6.6%, Redfin noted, the highest level since the first quarter of 2021. 

Some landlords are offering discounts such as a free month’s rent or reduced parking costs to attract renters, the real-estate company said, which brings down the overall cost of housing for renters. But those discounts aren’t factored into the data, which suggests that prices are “likely coming down faster than they appear,” Redfin said.

Congress is also working to address the issue of rising housing costs, particularly for renters.

House Democrats on Tuesday held a press conference to re-introduce legislation known as the Rent Relief Act to create a new, refundable tax credit for renters.

Democrats, including Representatives Danny Davis from Illinois, Jimmy Gomez, Scott Peters, and Jimmy Panetta, all from California, are proposing a refundable tax credit for renters earning less than $100,000 and paying more than 30% of their gross income in rent — a situation that more renters found themselves in as rents surged during the pandemic.

The credit would cover a percentage of the gap between 30% of one’s adjusted gross income and actual rent, and caps the benefit at 100% of the “Small Area Fair Market Rent.” A rule of thumb in personal finance is that one should not pay more than 30% of their income on housing. The fair market value is what is used to determine the Section 8 Housing Choice Voucher payment standards in areas designated by the federal government.

How much assistance renters would get from the credit would depend on how much the renters earn. 

If they earn less than $25,000 a year, they would get a tax credit for rent paid beyond 30% of their income. For households earning $60,000 a year, the tax credit would only cover half of the gap between 30% of their income spent on rent and how much they actually pay.