Even unexpected markets are growing rapidly.
Rent continues to increase nationwide and unfortunately it doesn’t show signs of stopping anytime soon. What’s more, these increases are no just impacting major metropolitan areas that are used to regular increases. Now we’re seeing significant increases in areas that haven’t historically faced such a high increase burden for their residents.
That’s according to a new report from the real estate experts at Zillow. The report looks at year-over-year rental payment increases, comparing rent level in January 2015 to those in the same month last year. The results were telling.
The increases shown are on par in many key metropolitan areas like Boston and Los Angeles. Rental increases in areas like these are nothing new. However, in areas like Nashville, Tennessee and Portland, Oregon increases were higher than the national average – and these areas aren’t really used to this kind of financial burden for their residents.
The report explains:
Two years ago, when West Coast rents were already soaring, rental growth in St. Louis was flat and even falling. But between January 2014 and January 2015, rents there rose 4.2 percent.
The biggest year-over-year increase makes that number look small by comparison. Rents increased by a startling 15 percent in San Francisco. According to the Zillow rental index, the median rent in this area is over $3,000. What’s worse, an increase of 14.9 percent when rents are already high means renters face increases of hundreds of dollars compared to last year.
Other areas are feeling the impact, too. Denver, Colorado saw rental growth of 10.2 percent from 2014 to 2015. The median rent there is now $1,827. But the real problem is the financial burden these types of increases place on renters in the area. For instance, let’s say your rent was $1,600 in Denver last year. For the same place this year, your rent would more than $1,750 now. That’s a significant difference to try and make room for in your budget.
“Most Americans can afford a slight increase in rental costs each year, but when you start talking about hundreds of dollars in increases, that’s not a gap most renters can easily cover without struggling,” says Maria Gaitan, Housing and Business Development Manager for Consolidated Credit. “As a result, renters in areas like these may have trouble maintaining stability so they can avoid problems with debt and save up for the future.”
How to overcome a rental increase burden
No matter where you live, even what would be considered a moderate rental increase this year can significantly stress your budget. With that in mind, here are some steps you can take to offset such an increase so you can eventually bring balance back to your budget.
- Compare the rental increase amount you face to the free cash flow in your budget. Free cash flow is the amount of money you have left over once all of your bills are paid and expenses covered each month. Covering a rental increase with this money mean you don’t have to make any cuts.
- If free cash won’t cover it, find spending leaks to close. A spending leak is where you are spending more money that what you have set on a certain type of expense. So let’s say your food budget is $500 for the month, but you see you’re spending $600 when you total up your receipts. Then you figure out why you’re overspending and fix the issue to regain control.
- When all else fails, cut discretionary expenses. These are the nice-to-haves in your budget that you don’t necessarily need. Trips to the hair or nail salon, a gym membership, magazine and media account subscriptions. Cut back on these things, reduce your budget for entertainment, stop dining out as much and take your lunch to work.
- In the meantime, explore avenues for more income. All reports and economic indicators point to the potential for salary and pay increases in 2015. If you have a bigger financial burden, you need a bigger paycheck. Take steps to get the raise you deserve with your current employer or if you can’t get a raise where you are, start look for better opportunities.
- Once you have more income, reassess you situation. You should be able to reestablish any cut expenses and increase your monthly savings after you secure more income. Savings is critical, because at this point, it’s actually getting more affordable to own your home instead of renting it.