PHILADELPHIA – A licensed practical nurse could not afford a $400 increase in her rent. So she went in search of a new place.
She wanted to rent a three-bedroom house for herself and two children and could afford up to $1,400 a month. She had always paid the rent on time, and her landlord wrote her a letter of recommendation. But as she searched in Philadelphia and Delaware County, Pennsylvania, she received denial after denial, said Liora Israel, a Philadelphia-based realtor at eXp Realty who helped her.
“Within two weeks, I had shown my client 44 homes and applied for just over 30,” Israel said. “And that’s not an exaggeration.”
Her client lost to people who had applied before her and to others who were willing to pay more than the advertised rent. For a property listed for $1,200 a month, the landlord went with someone who offered $1,700.
“I literally broke down and cried with my client,” Israel said.
In the recent competitive marketplace, homebuyers have often found themselves in bidding wars for a limited supply. But demand for rental properties is also strong and potential renters are now struggling, particularly those looking at the lower end of the market.
A Facebook post Israel wrote frustrated with their client’s situation was shared by more than 16,500 people, and rental property owners asked for help. One told Israel she was “heartbroken” about the mail and offered a house in Roxborough, a northwest Philadelphia neighborhood, to rent on Airbnb. Israel’s client signed a lease for $1,450.
Israel has experienced bidding wars on small properties since the pandemic began, she said.
“I’d never seen anything like it before,” she said, “and it was crazy.”
It’s gotten worse. Although rental bids do not seem to be a widespread topic, about a dozen Israeli clients have been asked to bid for rental properties in the last year.
‘Almost impossible’ to move
Danielle Hale, chief economist at Realtor.com, said she was surprised when she heard about rental offers last fall. But here and across the country, the scarce supply of available rental properties sets the stage for desperate acts.
According to Realtor.com, the vacancy rate in the Philadelphia metro area was 4.2% in the first quarter of this year. That’s down from 6.3% at the same time last year.
“In a highly competitive market, people are looking for ways to stand out from the crowd and increase their chances of getting the lease, just like we see in the sales market,” Hale said.
As rents continue to rise, struggling tenants, who typically have to pay a few months’ rent at a time, are already stretching their budgets looking for apartments. They don’t have the cash to offer higher monthly payments — if they can even find a spot.
Renters who can’t find housing are taking rooms, sometimes in illegal apartment buildings, said Rachel Garland, lead housing unit attorney at Community Legal Services in Philadelphia. Or they squeeze in with their families, live in cars, and turn to shelters. Some pay to stay at Airbnbs and hotels, which is more expensive than renting.
“It’s almost impossible for our customers to move now,” Garland said.
The rental environment has deteriorated during the pandemic, she added. “We have never seen it so difficult.”
The usual 60 to 90 day period for a move “is no longer a realistic time frame for renters to move,” she said. Tenants with housing benefit have it even more difficult to find apartments in their price range. Tenants with disabilities who need accessible apartments also face additional challenges. Some Community Legal Services clients searched for six months.
Although rental homeowners refuse many clients because of bad credit or a history of evictions, Garland said, “It doesn’t surprise me that renters who are perfect from a landlord’s check perspective also find it difficult to find an apartment.”
“Scary” rental market
High home sales prices discourage some renters from becoming homeowners.
College graduates temporarily living with parents and renters who postponed moving earlier in the pandemic are resuming plans. More and more tenants are being evicted and are looking for new apartments. More and more people live alone.
And some small rental property owners, particularly those who have struggled during the pandemic, are choosing to go out of business and put their rental properties up for sale in what is currently a strong seller’s market.
“The rental market is very scary, and it’s especially scary for people who have affordable housing at the lower end of the spectrum,” said Rachel Falkove, executive director of the nonprofit Family Promise of Philadelphia.
According to a report by Realtor.com, the average rent nationwide reached $1,827 in April, up 21% from April 2020 and nearly 17% from April 2021. It’s on track to surpass $2,000 by August. April marked the 14th consecutive month of record high median rents. In the Philadelphia metro, the median rent is $1,775, up almost 8% from last year.
With inflation driving up the prices of everything, around two-thirds of renters say the biggest drain on their budget is rising rents, according to a Realtor.com survey of more than 2,400 renters and landlords released this month became.
In addition to the simpler billing, because the citizens pay, the landlords are also reacting to the pressure of higher operating costs. Almost three quarters of the rental apartment owners surveyed plan to increase rents for at least one property within the next 12 months.
“We’ve had people paying 50% to 60% of their income for housing,” Falkove said, “and the rates are going up a lot.”
As rents go up, some renters who have been living and wanting to stay in their homes for years will become more expensive. Seniors and other renters with fixed incomes are particularly at risk. Renters seek help from organizations like Family Promise when they can’t find a new home.
A woman who used to be homeless had her family move out of their four-year apartment because of mold and maintenance issues rather than renewing her lease, Falkove said. She figured they would be staying in a hotel for a week or two while she looked for somewhere else to stay.
“It’s been a few months,” Falkove said.
The woman ran out of money. The nonprofit has the family on a temporary monthly lease.
June 2020 was the first time Israel experienced a rent bidding war by eXp Realty.
After her aunt applied for a townhouse in Sicklerville, NJ, the real estate agent said many people wanted it and some offered more than the asking price.
“And I was like, ‘What? With a rental? No way,’” Israel said. Her aunt offered $200 more a month. But someone had already surpassed that.
A few weeks ago, Israel’s brother found a house in Delaware County with a listed rent of about $1,400. After applying, Israel said, the property manager said someone offered up to $1,875 a month. So could he beat that? He kept looking.
The question is well known to Paula Wall, who was looking at homes across the region earlier in the pandemic. One owner who had listed a two-bedroom condo for about $1,400 told her a couple was willing to pay more. Wall offered an extra $50 a month, but the owner settled on a tenant who could pay $100 more. That happened a few times.
“It makes no sense. It’s not like a house that you buy,” she said. “Don’t make me say, ‘Someone else is bidding higher than you.'”
She has been discouraged by the rental market and has decided to try and buy her first home.
Wall, 62, who has adult children, is living with her family in an apartment in Maple Shade, NJ while she continues to improve her credit score and work with a financial advisor. She also has two daughters aged 5 and 6 who she adopted a few years ago. She wants a yard for them to play in and a piece of land to leave them.
“I gave myself a year to have a home,” she said. “So I want to be in my house next year.”
The prospects for the rental market
The Philadelphia-based Tenant Union Representative Network hasn’t heard rent bidding is a widespread problem, but chief executive Nicole Lawrence said she received a call about someone being outbid for an apartment in Lansdowne, Pennsylvania.
“The sad reality” is that as neighborhoods become gentrified and the cost of living increases, rents go up, Lawrence said. “I think the situation will get worse, not better.”
Realtor.com’s Hale said she expects rental growth to at least slow, as it has done slightly throughout the year.
“We’re moving in the right direction, but not very quickly,” she said. “There are some bright spots, but it’s still going to be a challenging market.”