U.S. Renters Catch a Break as Wages Heat Up While Lease Costs Cool

U.S. Renters Catch a Break as Wages Heat Up While Lease Costs Cool

Bloomberg  | Jan 11, 2019 10:58AM ET

U.S. Renters Catch a Break as Wages Heat Up While Lease Costs Cool

(Bloomberg) -- Something unusual is happening in U.S. housing: rental inflation is decelerating even as wage growth picks up.

Over the last several business cycles, faster gains in average hourly earnings have meant faster increases in rental inflation, as landlords have exercised their market power to wrest more money from workers. And since 2011, rental inflation has easily outpaced wage growth.

During the last two years, however, there’s been a reversal of this trend, as rental inflation has moderated and wage growth has picked up. The slowdown in price gains probably reflects a glut of apartments in urban centers across the country.

In December, rental inflation cooled to 3.5 percent, marking the slowest pace since mid-2015, according to data published Friday by the Labor Department.

Separate data released last week showed average hourly earnings for production and nonsupervisory employees -- a group that comprises 82 percent of the private-sector workforce -- were up 3.3 percent from a year earlier, marking the fastest pace of increase of the current economic expansion so far.

If both trends continue, U.S. households may soon find they have a little extra money left over after accounting for increases in the rent for the first time in quite a while.

© Bloomberg. SAN FRANCISCO - JULY 08: A sign advertising apartments for rent is displayed in front of an apartment complex July 8, 2009 in San Francisco, California. As the economy continues to falter, vacancy rates for U.S. apartments have spiked to a twenty two year high of 7.5 percent, just short of the record high of 7.8 percent set in 1986. (Photo by Justin Sullivan/Getty Images)

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