{"id":2152,"date":"2021-04-01T06:00:00","date_gmt":"2021-04-01T06:00:00","guid":{"rendered":"https:\/\/preprod.realtrends.com\/blog\/2021\/04\/01\/landlords-profiting-less-and-renters-are-paying-more\/"},"modified":"2025-03-13T02:37:15","modified_gmt":"2025-03-13T02:37:15","slug":"landlords-profiting-less-and-renters-are-paying-more","status":"publish","type":"post","link":"https:\/\/preprod.realtrends.com\/blog\/2021\/04\/01\/landlords-profiting-less-and-renters-are-paying-more\/","title":{"rendered":"Landlords are profiting less, renters are paying more"},"content":{"rendered":"\n

The housing industry had a record-breaking 2020\u2014unheard-of interest rates, nearly nonexistent inventory, crazy home value appreciation. But not all broken records signify a profitable market. In the midst of pandemic eviction moratoriums and foreclosure forbearances, in certain markets, landlords are profiting less, while renters are paying more\u2014often more than they can afford. According to recently released data, neither landlords nor renters are finding the pandemic housing frenzy is working in their favor.<\/p>\n\n\n\n

For example, a recent study found that the average annual gross rental yield (annualized gross rent income divided by median purchase price of single-family homes) among the counties surveyed is 7.7% for 2021, which is down from an average of 8.4% in 2020. Within that group of counties, the yield declined from 2020 to 2021 in 87% of counties.<\/p>\n\n\n\n

What does this mean for the market?<\/h4>\n\n\n\n

What does landlords profiting less mean for the housing market? It’s difficult to tell while so much uncertainty remains, but in an already demanding industry<\/a> where profit margins are often tight, it could inspire some landlords to cut their losses … which could eventually increase inventory. For example, if interest rates remain low, which the Federal Reserve has indicated will be the case for the foreseeable future, would-be renters are better able to buy<\/a>, reducing demand, and sometimes rents\u2014as metro areas like New York City have seen happen over the last year. Similarly, with lumber prices skyrocketing<\/a> and shortages of appliances<\/a> and other home renovation necessities a problem for contractors, rehabbing a tired rental to increase profits isn’t as easy as it was, say, a year ago. <\/p>\n\n\n\n

Landlords profiting less in 2020 led analysts to predict more of the same in 2021. Here are some numbers explaining how landlords are profiting less: Potential annual gross rental yields for 2021 fell compared to 2020 in almost 87% of the counties that were analyzed\u2014led by Baltimore City\/County, Maryland (yield -43.9%); St. Louis City\/County, Missouri (-35.5%); St. Louis County, Missouri (-29.3%); Bonneville County (Idaho Falls), Idaho (-26.7%) and Fairfield County (Stamford), Connecticut (-24%). Among counties with a population of at least one million, those with the greatest decreases in potential annual gross rental yields from 2020 to 2021 include Miami-Dade County, Florida (-19.9%); Oakland County (Detroit), Michigan (-18.6 percent); King County (Seattle), Washington (-17.4%); Palm Beach County, Florida (-14.2%) and Fulton County (Atlanta), Georgia (-13.3%).<\/p>\n\n\n\n

The report wasn\u2019t all bad news. For example, Wages are rising faster than rents in 76.6% of the counties that were analyzed, with the highest scorers in Southern California, Arizona, and the Chicago area. Rents rose faster than wages in just 23.4% of the counties that were analyzed, including Harris County (Houston) and Tarrant County (Fort Worth), Texas; Sacramento County, California; Bronx County, New York; and Mecklenburg County (Charlotte), North Carolina.<\/p>\n\n\n\n

But many renters are unable to keep up with increasing rents, even those who earn working-class wages and have steady work, according to the Urban Land Institute\u2019s 2021 Home Attainability Index. <\/p>\n\n\n\n

A ULI report<\/a> based on the index numbers identified 12 occupations that had been affected by the pandemic, and looked at each occupation\u2019s worker wages to demonstrate whether an income surplus (meaning that a household earns more than necessary to afford the given housing type without being cost burdened) or an income gap existed. The occupations comprised three broad categories that could face heightened risks: healthcare workers, frontline workers and workers with elevated risk of income disruption. The report found that a median-wage worker in only three occupations that were examined\u2014geriatric nurse, cardiac technician and long-haul delivery truck driver\u2014could afford to rent a modest two-bedroom apartment in more than half of the regions in the dataset.<\/p>\n\n\n\n

Here are a few of the main points from the ULI report regarding affordability:<\/p>\n\n\n\n