Capitol Report: U.S. renters still not getting much price relief

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Rents are still high despite a big increase in new construction.

Renters still can’t catch a break: Prices are still rising rapidly despite a rush by builders to finish more apartments in the past few years.

The government on Friday said rents rose by 3.8% in the 12 months ending in September. That’s just a few ticks below a nine-year high of 4% set at the end of 2016.

Rising costs have squeezed millions of renters since 2014, especially in major cities and other highly sought locations. A stronger economic and surge in hiring has allowed more people to buy or rent homes, but the available supply simply hasn’t kept up.

Builders have ramped up construction, leading to lower prices in some areas. In some cities such as New York, a glut of high-end properties has forced landlords to offer more incentives. And rents are more moderate in smaller cities and less populated areas.

Yet by some measures the housing industry is still not keeping pace with demand.

The National Multifamily Housing Council estimates builders completed an average of 225,000 apartments each year from 2011 to 2016. The problem is, the economy needs to add about 328,000 units a year to keep up, the trade group contends.

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Builders were on track to complete more than 300,000 rental units this year, but the pace of construction has slowed recently. The number of multifamily units under construction dropped to an annual rate of 329,000 in August from 421,000 in January.

Housing industry officials say a shortage of skilled workers, a scarcity of affordable lots, red tape, and stiffer lending standards are among the headwinds.

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In the past rising rents would often encourage more people to buy their own homes. A recent survey by the National Association of Realtors, however, found that only 21% would consider buying a home in response to higher rents.

One reason for their reluctance: their incomes are only growing half as fast as the prices of homes. Through August incomes rose an average of 2.8%, but the cost of previously owned homes are climbing at a nearly 6% pace, according to the S&P CoreLogic Case Shiller index.

The obstacles to ownership is evident in sales of new and used homes. They had been on the up and up through early 2017, but lately they’ve tapered off.