Everywhere you look, America’s housing crisis is getting worse

Home for sale
On a month-over-month basis, prices rose 2.3% in June. That’s the same amount prices typically rise in an entire year.

  • Home sales have slowed, but buyers waiting for prices to cool were out of luck in June.
  • Home prices surged at the fastest annual pace since 1979 as demand pressures endured, CoreLogic said.
  • Rentals aren’t better. Prices leaped 2.5% in June, to well above the pre-pandemic trend, Apartment List said.
  • See more stories on Insider’s business page.

Housing prices got out of hand early in 2021, so Americans went on something of a strike.

They simply thought the deals weren’t good enough, and home sales subsequently slowed from the frenetic pace seen earlier in the pandemic. The market is still far from normal, though, and by many measures, the affordability crisis is only getting worse.

The stark imbalance between the number of homes available and the number of people wanting to buy continued to lift prices at an astonishing rate into summer. Prices rose 17.2% year-over-year in June, housing data company CoreLogic said Tuesday. That’s the largest one-year increase since 1979, though the measure is somewhat skewed by the much lower prices seen earlier in the pandemic.

On a month-over-month basis, prices rose 2.3% in June. That’s how much prices typically rise in an entire year.

The market remains rife with prospective buyers and too few sellers. The rate of inflation risks pushing less wealthy Americans out of the market.

“With plenty of cash on the sidelines, along with very low mortgage rates, prices are heading up and affordability will become a more acute issue for the foreseeable future,” Frank Martell, president and CEO of CoreLogic, said in a statement.

The homebuying spree is bleeding into the rental market

Rents rose 2.5% from May to June and sit 11.4% higher than they were at the end of 2020, Apartment List said in a July 26 report. By comparison, rent growth from January to July averaged just 3.3% in the three years before the pandemic.

Apartment List

The recent surge in rent prices places costs “well ahead” of the growth trend seen in 2019, Apartment List economists Chris Salviati, Igor Popov, and Rob Warnock said in the report. The price boom is taking place in “virtually every major market across the country,” they added. And while rents remain below their pre-pandemic levels in 13 major markets, prices are rebounding quickly, according to the report.

“As economic recovery continues to gain momentum, we may be seeing the release of pent-up demand from renters who had been delaying moves due to the pandemic,” the team said. “Whereas last year’s peak moving season was halted by the pandemic, this year’s seasonal spike is more than making up for lost time.”

UBS says there’s some reason to be optimistic

While prices have leaped higher, spending should soften as inventory bounces back in the months ahead, UBS economists led by Ajit Agrawal said in a Tuesday note. That’s already shown up in homebuyer sentiments, which soured through 2021 amid the historic price surge. Pending home sales also slowed, suggesting high prices are finally slamming the brakes on market activity.

Separately, the population shift away from cities has started to fade, the team said. The start of the pandemic saw Americans move away from cities and flock to exurbs, areas more rural than suburbs that offer more space and cheaper housing.

Yet the trend slowed somewhat in May and June as reopening led businesses to call employees back to their offices. That return-to-work should reverse out-migration from many cities and, in turn, cool booming demand in suburban and rural neighborhoods, the economists said.

Still, that reversal isn’t likely to play out until the end of the year, according to UBS. Buyers, then, are best off staying patient as economists forecast weaker demand, rebounding supply, and a fizzling-out of the exurban migration.

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2 people who face eviction on the expiring ban: ‘The nightmare is not over’

A woman walks past a wall in Los Angeles that has graffiti reading "Forgive Our Rent"
The national eviction ban ends on July 31.

  • The national eviction ban ends Saturday, putting many renters at risk.
  • Wendy Fink, a preschool teacher in Phoenix, owes $1,700 in unpaid rent.
  • Mehran Mossaddad, a father in Atlanta, isn’t sure if his landlord will renew his lease.
  • See more stories on Insider’s business page.

The national eviction moratorium is set to expire July 31. But as the economy struggles to regain pre-pandemic momentum, many renters are grappling with months of unpaid rent.

The Biden administration on Thursday said renewing the eviction ban is left up to Congress. Experts estimate 6 million Americans face eviction once housing protections end Saturday. Some states have extended the moratorium for a while longer, but most are set to end protections.

In December, Congress approved $25 billion in rental assistance and another $21 billion in March, but the funds have been slow to disperse to landlords and tenants due to software issues, hesitancy among states to sign off on payments, and other complications.

Insider spoke with two people who are uncertain about the future of their housing arrangements and could face eviction when the moratorium ends.

Mehran Mossaddad, 59, is a father living in Atlanta, Georgia, who owed over $23,000 in unpaid rent

A man with glasses in a shirt and tie
Mehran Mossaddad.

When we first entered lockdown last March, I stopped driving for Uber full time to take care of my 10-year-old daughter and help with online learning.

Because there was no daycare, no school, and I couldn’t afford a babysitter, I fell behind in rent and used the $800 I had in savings to pay for food.

I received $125 a week in unemployment (plus an additional $600 a week in federal aid until it ended last year, then $300 a week until it ended two months ago) but it was slow to arrive, and I didn’t receive my first stimulus check until earlier this year due to an error with my social security.

Last August, I received my first eviction notice. My rent is $1,600 a month, and at the time of my first eviction notice I was four months behind. The property management company opened a court case against me, and once that happened I had a record, which made it impossible for me to rent or buy another place. I tried and shopped around at 10 different apartments, but no one would have me.

During this time, I had a lot of anxiety. One day when I came home from the grocery store, I saw police cars outside of my neighbor’s house because they were getting evicted. My knees started shaking so badly I had to sit down. My limbs would go numb in the middle of the night just thinking about whether or not we would have a home the next day.

I don’t think I’ll ever be mended. I have no other family here in Georgia and no Plan B if my daughter and I were to be evicted.

DeKalb County, where I live, puts a cap on how much federal assistance renters can have. Last month, after multiple conversations with the county and the property management, we agreed I would pay $10,000 of the $23,000 I owed in back rent for the eviction notice to be resolved. The county offered $5,000, so I had to scrape together the rest from friends and started driving for Uber again.

Once the agreement was signed and I paid my half of the $10,000, the property management agreed to give me two months of rent for free and forgave the rest. But the eviction notice still remains on my record, and the landlord hasn’t indicated whether or not it will agree to renew my lease at the end of this month.

I hope the government will extend the moratorium, but I still have anxiety attacks because the nightmare is not over. I stay up at night thinking, is this a new era for us? Or is this the beginning of the dark ages?

Wendy Fink, 52, is a preschool teacher living in Phoenix, Arizona, and has $1,700 in unpaid rent

A woman outside looking at the camera
Wendy Fink.

The preschool I work at closed for two weeks in March 2020 and I was furloughed, then opened and closed several more times.

At the beginning of the pandemic, I was able to keep up with our $1,300-a-month rent because I had some money saved and my mother, who was on social security, helped. There were several times where I tried to get on unemployment, but I gave up because it was impossible to get anyone on the phone to help or receive an email back.

Everything changed earlier this year. We started receiving late notices in the mail from our property management because we had over $4,000 in back rent. The apartment complex I live in charges $15 per day for late rent, and it quickly started getting out of hand. I paid what I could, which was not much because I wasn’t working full time, and even with the stimulus checks and living slim, we kept falling short.

In March, we received $3,400 in rental aid from a nonprofit in Phoenix. It was a lengthy process, and I was thrilled to finally be able to start to catch up, but then my mother became very sick and was hospitalized. We found out earlier this summer she had stage four pancreatic cancer.

I didn’t want her to live out her final days in a hospice facility, so we set up a hospital bed in our living room and I stopped working to focus on her health. The doctors said we would have months, but it actually turned out to only be weeks. She passed away in June at the age of 75.

By the time my mother died, I owed $3,900 in back rent. My son paid off $2,200 of it, but as the eviction moratorium is coming to an end I don’t have any hope Maricopa County, where I live, will extend it. I’ve started to prepare for the worst, and in the darkest corners of my mind I think I might have to end up in a residential hotel, which is a dismal place to live.

Last month, I started a GoFundMe to help make up the $1,700 I still owe, but haven’t been able to hit $1,000. It was embarrassing for me to even start a fundraiser because in this country there’s so much stigma around being poor. I’m relying a lot on the generosity of my friends and family right now, but I’m sure I’ll be served with an eviction notice on the first of August. I have no doubt.

The past few months have been stressful and I’m white-knuckling it. The pandemic has made me realize anyone can end up in this situation, especially with wages as low as they are and rent as high as it is. We’re told to save our money, but when you have nothing to save, you can’t prepare for an emergency.

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Cincinnati is the most affordable US city for renters living alone, a new report shows. Here’s how the top 10 stack up.

Cincinnati, O
Cincinnati claimed the top spot in SmartAsset’s study for the fourth year in a row.

  • SmartAsset compared the 100 largest US cities to see which are the most affordable for solo renters.
  • It used five metrics, including wages and the percentage of housing units with two bedrooms or fewer.
  • These are the 10 most affordable cities, according to its research.
  • See more stories on Insider’s business page.
SmartAsset compared the 100 largest US cities.

One Bedroom Apartment in Chicago Sonder
A one bedroom apartment in a Chicago Sonder location.

The financial-advice company analyzed the cities based on five metrics: the percentage of housing units with fewer than two bedrooms and the average price of these, median earnings for full-time workers, unemployment rate, and cost of living.

It then ranked 10 most affordable cities for solo renters.

1. Cincinnati, Ohio

Cincinnati
Cincinnati ranked top in the study.

Cincinnati claimed the top spot for the fourth year in a row.

Average rent for a one-bed unit is $612 per month, the fifth-lowest of the 100 cities in the study, and it has a relatively low cost of living at $22,721 per year, putting it in the top ten, SmartAsset said. I

nsider’s Liz Knueven reported that her grocery bills were nearly cut in half when she moved from Seattle to Cincinnati, and dining out and transport suddenly became a lot cheaper, too.

Cincinnati also came in the top 20 for its April 2021 unemployment rate, at 4.6%, and the proportion of occupied housing units that have fewer than two bedrooms, at just over 28%, per SmartAsset’s report.

2. Minneapolis, Minnesota

Minnesota Arch Bridge over river
Nearly a third of occupied housing units in Minneapolis have just one bedroom.

Minneapolis‘ average rent and living costs both ranked towards the middle of the 100 cities SmartAsset analyzed, but the city scored well on the other three metrics.

Its April unemployment rate was 4.2%, compared to a national average of 6.1%, nearly a third of occupied housing units in the city have one bedroom, and average earnings for full-time workers in 2019 were almost $56,500.

3. Omaha, Nebraska

omaha
Omaha’s April unemployment rate was just 3%.

Omaha’s April unemployment rate was less than half the national average, at just 3%, putting it joint second-lowest in the study. It also has a relatively low cost of living and average rent, SmartAsset found.

4. St. Louis, Missouri

st louis
St Louis ranked in the top 20% for both average rent and cost of living.

Nearly a third of occupied housing units in St. Louis have one bedroom, SmartAsset said in its report. It also ranked in the top 20% of cities that SmartAsset analyzed for both average rent and cost of living.

5. Lexington, Kentucky

lexington kentucky
Lexington’s unemployment rate in April was just 3.2%.

Lexington‘s unemployment rate in April was well below average, at just 3.2%. The city also has low living costs and average rents, SmartAsset found.

6. Lincoln, Nebraska

Lincoln, Nebraska
Lincoln had the lowest April unemployment rate in the report.

Lincoln had the lowest April unemployment rate of the 100 cities in the report, at 2.2%. It also has below-average rent and living costs, SmartAsset said.

7. Pittsburgh, Pennsylvania

Pittsburgh
Pittsburgh’s annual cost of living is $23,463 per year.

Pittsburgh has the 17th-lowest estimated annual cost of living of the 100 cities SmartAsset analyzed, at $23,463 per year. It also ranked within the top 30 for its average earnings for full-time workers, at $51,328 per year.

8. Louisville, Kentucky

Louisville, Kentucky
It ranks in the top 15% for three metrics.

Louisville, Kentucky ties in eight place with Tulsa, Oklahoma. It ranks in the top 15 of the 100 cities SmartAsset analyzed for three metrics: cost of living, April unemployment rate, and average rent for units with fewer than two bedrooms, where it came in at just $676 per month.

8. Tulsa, Oklahoma

Tulsa
Tulsa has the second-lowest cost of living of the 100 cities in the study.

Tulsa ranks within the top 10% of the cities SmartAsset analyzed for two metrics: average rent for units with fewer than two bedrooms, at $658 per month, and annual cost of living, at $22,786 – the second-lowest in the study.

The city is offering $10,000 to out-of-state remote workers to relocate there as part of a program aiming to help fuel Tulsa’s growth.

10. Boise, Idaho

boise
Boise’s unemployment rate was just 3% in April.

Boise had the joint second-lowest April unemployment rate of the 100 cities in the study, at 3%. It also came 10th for cost of living, at $23,123 per year.

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The average person earning minimum wage has to work 79 hours a week to afford a one-bedroom apartment

McDonald's fight for $15 wage
An employee of McDonald’s protests outside a branch restaurant for a raise in their minimum wage to $15 an hour, in Fort Lauderdale on May 19, 2021.

  • Rent is unaffordable for the average minimum-wage earner in the US, according to a recent report.
  • Though the Fight for $15 has gained traction, $15 an hour often isn’t enough to afford housing.
  • Low-wage workers will continue to struggle after the pandemic ends.

For the nation’s minimum-wage workers, even working two full-time jobs sometimes isn’t enough to afford rent, according to a new report from the National Low Income Housing Coalition.

The average minimum-wage worker would have to work 79 hours a week to afford a modest one-bedroom rental and 97 hours a week to afford a modest two-bedroom rental, hours that would be difficult for a single person and nearly impossible for single parents.

“People who work 97 hours per week and need 8 hours per day of sleep have around 2 hours per day left over for everything else – commuting, cooking, cleaning, self-care, caring for children and family, and serving their community,” the report stated. “Even for a one-bedroom rental, it is unreasonable to expect individuals to work 79 hours per week to afford their housing. For people who can work, one full-time job should be enough.”

The federal minimum wage is $7.25 an hour and hasn’t increased in over a decade. Though the Fight for $15 – a nationwide campaign to raise the minimum wage – has gained momentum with some major companies and states instituting $15 minimum wages, even a $15 hourly wage isn’t enough to lead a comfortable life.

According to the report, an individual would have to earn $20.40 an hour to afford the average modestly priced one-bedroom rental and $24.90 for a two-bedroom apartment, without spending more than 30% of their income on housing.

“Stable, affordable housing is a prerequisite for basic well-being, and no family should live in danger of losing their home,” the report stated.

In more expensive housing markets, workers must earn even more to afford rent. In New York state, where the average housing wage is $34.03 an hour, an Amazon employee making $19.30 an hour in New York City has lived in her car since 2019 because she can’t find affordable permanent housing.

Although wages overall jumped during the pandemic as businesses struggled to fill open positions, salaries for people already in the workforce didn’t go up. Even pre-pandemic economic conditions were difficult for low-wage workers, and the report predicts that workers will struggle even more now to pay off debt accumulated during the pandemic.

“Even if economic recovery is robust and sustained, low-wage workers will continue to struggle.”

Read the original article on Business Insider

Biden administration extends nationwide ban on evictions for one ‘final’ month through the end of July

rent mortgage protest pandemic
  • The Biden administration extended a nationwide ban on evictions until July 31.
  • The move comes after Democrats called on Biden to extend the ban.
  • The White House said it will work with state and local governments to prevent evictions.
  • See more stories on Insider’s business page.

The Biden administration on Thursday extended a nationwide ban on evictions through the end of July, as renters recover from the economic downturn caused by the COVID-19 pandemic.

The ban, put in place by the Centers for Disease Control and Prevention, was set to expire on June 30. CDC Director Rochelle Walensky on Thursday signed the extension until July 31.

The moratorium is meant to help combat the spread of the coronavirus by keeping people unable to pay rent in their homes rather than in a more crowded setting, such as a homeless shelter, according to the CDC.

This is the third time the CDC order has been extended since it first went into effect in September.

The White House said this will be the “final” extension, but announced a series of actions it would take to help state and local governments prevent evictions, including accelerating the distribution of billions of dollars in emergency rental assistance and encouraging anti-eviction diversion practices to state courts.

The move comes after Biden faced pressure from congressional Democrats and housing advocates to extend the moratorium. A group of 41 Democratic lawmakers on Tuesday argued in a letter to Biden that evictions would “take lives and push households deeper into poverty” and that the issue is an “urgent matter of health, racial, and economic justice.”

Around 7 million people in the country are currently behind on their rent payments, according to a Census Bureau survey released in June.

Several Democrats hailed the Biden administration’s action on Thursday and thanked the White House for moving swiftly on the matter.

Yet not everyone was pleased with the outcome. Rep. Jamaal Bowman of New York tweeted: “These are short term solutions for a long term problem. Evictions were harmful before the pandemic and will be harmful after.”

Read the original article on Business Insider

Progressive Democrats call on Biden and the CDC to extend eviction moratorium which expires next week

ayanna pressley cori bush ilhan omar
Usher speaks with Rep. Ilhan Omar, D-Minn., second from left, and Rep. Ayanna Pressley, D-Mass., second from right, as they arrive for an event to mark the passage of the Juneteenth National Independence Day Act, in the East Room of the White House, Thursday, June 17, 2021, in Washington.

  • A group of House Democrats called on Biden and the CDC to extend a federal eviction moratorium.
  • “It is an urgent matter of health, racial, and economic justice,” they wrote in a letter.
  • Around 7 million people are still behind on their rent, according to the Census Bureau.
  • See more stories on Insider’s business page.

Several progressive Democrats on Tuesday called on President Joe Biden and the Centers for Disease Control and Prevention to extend a federal eviction moratorium that is set to expire on June 30.

In a letter signed by 41 members of Congress and led by Reps. Ayanna Pressley of Massachusetts, Cori Bush of Missouri, and Jimmy Gomez of California, the lawmakers urged the White House and CDC to “take action to prevent a historic wave of evictions and keep renters safely in their homes.” The letter was first reported by ABC News.

The group of House Democrats cited Census Bureau data that showed minority households, including Black, Latino, Asian and Indigenous, are more likely to be behind on their rent payments, arguing in support of the extension “to protect vulnerable renters” and “curtail the eviction crisis disproportionately impacting our communities of color.”

Around 7 million people are still behind on their rent, according to the Census Bureau.

The lawmakers also pointed to data from the Consumer Financial Protection Bureau that found that communities with lower COVID-19 vaccination rates and higher cases happen to be more at risk of facing eviction.

“Allowing the moratorium to expire before vaccination rates increase in marginalized communities could lead to increased spread of, and deaths from, COVID-19,” they said in the letter.

“Evictions take lives and push households deeper into poverty, impacting everything from health outcomes to educational attainment,” they added. “The impact of the federal moratorium cannot be overstated, and the need to strengthen and extend it is an urgent matter of health, racial, and economic justice.”

Tenants struggling to pay their rent during the COVID-19 economic crisis were handed a lifeline in March 2020, when Congress first passed a federal eviction moratorium. The CDC then issued its own moratorium in September, which has since been extended twice. The current moratorium is set to expire at the end of the month.

Biden has previously expressed support to halt evictions until September 30. In his $1.9 trillion American Rescue Plan passed in March, the president allotted nearly $22 billion toward emergency rental assistance.

The White House did not immediately return Insider’s request for comment.

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NYC rent is still pretty cheap, and it’s luring New Yorkers back to the city

New York City
Returning New Yorkers are taking advantage of affordable city rent.

It’s a fine time to be in New York City right now.

Covid cases are dropping as vaccination rates are rising, New Yorkers are staying out past midnight again, and rent is, by NYC standards, actually affordable. It’s proved the perfect recipe for the return of those who left the city as the pandemic raged.

The number of new Manhattan lease signings hit a record high since the Great Recession at 9,941 in May, per a report by appraiser Miller Samuel and brokerage Douglas Elliman. That’s four times what it was a year ago, and nearly 60% of these renters signed two-year leases.

As Bloomberg’s Oshriat Carmel wrote, New Yorkers are taking advantage of the city’s downtrodden rental market to plan their return, snagging concessions and discounts while they can at a long-term rate.

The pandemic saw the largest year-over-year declines on record for Manhattan, Brooklyn, and Queens, dropping 15.5% in Manhattan and 8.6% in the outer boroughs, per StreetEasy’s January Rental Report. The median asking rent in Manhattan was $2,750 – its lowest since March 2010, when rents dropped during the great recession.

“The pressures COVID placed on the marketplace created a unique opportunity to secure leases in prime locations and great buildings for significant discounts,” agent Ryan Kaplan, of Douglas Elliman, previously told Insider.

Many young professionals turned the plunging rents to their favor, upgrading to luxury apartments for $1,000-plus discounts that finally fit their budgets. Now, returning New Yorkers are catching on to the savings game.

Read more: New York City is back

New Yorkers are making their comeback

New Yorkers are returning in droves, Insider’s Avery Hartmans reported. She cited data from location-data firm Unacast, which found that migration to New York is growing twice as fast as in 2019.

Mansion Global previously reported the number of outward migrants from the NYC metro area ticked upward from 2019 to 2020 – a loss of 6.6 per 1,000 residents grew to 10.9 – but those who left for the suburbs were already returning.

“It’s preparation for a return to school, return to work, escape from your parents’ homes,” Jonathan Miller, president of Miller Samuel, told Bloomberg’s Carmel. “We’re undergoing a return back to normal life and this is part of it.”

As part of the return to normalcy, rent in the city has since begun to rebound. In April, it was no longer at the bottom of the market for the first time since the pandemic began, according to a follow-up StreetEasy report. But the same report says that the rebound will be slow.

Libertina Brandt reported for Insider in March that rents could stay widely cheap for the rest of the year.

As Nancy Wu, a StreetEasy economist, told Brandt, “Prices will continue to fall until the inventory settles a bit, more people come back to the city, more jobs are recreated from the loss of small businesses, and the city returns, somewhat, back to where it was before the pandemic started.”

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Renters in Berlin have a radical plan to seize apartments from landlords and are set to force a referendum that could revolutionize the battle for fair rent

Analysis banner
People protest against a decision by Germany's Constitutional Court that the law called "Mietendeckel" (rent cover) putting a rent cap on apartments in Berlin is invalid, in Berlin, Germany, April 15, 2021. REUTERS/Christian Mang
People protest against a decision by Germany’s Constitutional Court that the law called “Mietendeckel” (rent cover) putting a rent cap on apartments in Berlin is invalid, in Berlin, Germany, April 15, 2021. REUTERS

  • Renters in Berlin plan to force a referendum on nationalizing thousands of apartments in the city in order to lower rents.
  • Under the plan, landlords would be forced to sell their apartments to the city, which would then lower the rent.
  • Activists have more than half the 240,000 signatures needed to force a referendum.
  • It is the latest front in the battle for fairer rents after plans for a rent cap were overturned in the city.
  • See more stories on Insider’s business page.

Like many cities around the world, rents in the German capital of Berlin have soared in recent years, doubling in the last decade alone.

But unlike many other cities, the people of Berlin are actually doing something about it.

First residents persuaded the local authorities to bring in a rent cap that instructed landlords to freeze rents at 2019 levels.

However, that was overturned by Germany’s federal court in April, which ruled the measures unconstitutional.

Now local campaigners are planning something even more radical: a bid to nationalize thousands of privately owned apartments in the city.

Specifically, campaigners want the government to take apartments from real estate firms that own more than 3,000 apartments, place them into public ownership, and rent them out at more affordable rates.

The estimated market value of the real estate in question is up to €36 billion ($44 billion), CityMonitor reported, but the group has suggested compensation of as little as €8 billion ($10 billion), arguing that the prices are based on speculation and overpriced rental yields rather than real value.

“The housing market in Berlin seems like paradise if you’ve lived in London or Paris,” Jonas Becker, a 30-year-old academic who lives in the German capital, told Insider.

“The housing market in Paris is absurd because you can’t find any affordable housing. But that’s an evolution we see in Berlin as well. The rising rents don’t correspond anymore to wages, and that’s something we want to address.”

Becker is a spokesman for a group of housing activists called “Expropriate Deutsche Wohnen & Co,” referring to the city’s biggest real estate group.

The group says the compensation would be provided to landlords gradually using the rents, rather than costing the taxpayer.

Berliners are rising up for fairer rents

germany rent landlords.JPG

The idea is certainly very radical, but it is gathering plenty of support from Berliners.

A petition started in February for a referendum on the plan has already collected 130,000 signatures, meaning there is a very real possibility that Berlin authorities will be forced to hold a referendum on the subject in September.

In a city where around 85% of residents live in rented accommodation, and where more than 200,000 publicly owned apartments have been sold off since 1990 to private equity firms and hedge funds, the issue has taken on acute significance.

“For my generation, it’s nearly impossible to own a building or an apartment – something that has been very possible for our parents,” said Becker. “We will probably rent our whole lives.”

He said that many Berlin residents, especially younger ones, were radicalized by the German federal court’s decision to overturn the rent cap last year, which prompted thousands of people to march through the streets, banging pots and pans in protest. Many landlords are now charging their tenants more than they were before the rent cap, in order to make up for lost income.

The group wants to collect 240,000 signatures by the end of June, which would be enough to force a referendum on the subject. There is also a strong chance that the referendum could pass, forcing lawmakers to consider the plan: A poll carried out in April indicated that 47% of Berlin residents supported the proposal, with 43% opposed and 9% undecided.

However, even if the referendum is successful it will be a struggle to actually get the plan into legislation. Die Linke, the left-wing party with 69 seats of 709 in Germany’s parliament, is the only one to have offered the proposals formal support, Deutsche Welle reported. Germany’s dominant conservative parties have been quick to condemn the proposals.

Nonetheless, Becker said that even talk of a referendum has pushed radical solutions for Berlin’s rental problems into mainstream dialogue. “Many people now consider us a real opponent they have to deal with, not as left-wing radicals who want a revolution. That’s not what we want to do,” he said.

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Rent’s big comeback could be the thing that makes stronger inflation permanent

San Francisco apartment tour interior
Manager Justin Sielbach gives a tour of a unit at the 100 Van Ness apartment building on Friday, March 19, 2021 in San Francisco, California.

  • Shelter inflation – which tracks rent prices – is set to boom just as price growth elsewhere cools.
  • The jump could lead inflation to normalize above the Fed’s long-term target of 2%, Morgan Stanley said.
  • Climbing home prices and the end of payment forgiveness will likely drive shelter inflation higher.
  • See more stories on Insider’s business page.

Rent prices tumbled at the start of the pandemic and are only just now on the rise. But where inflation in other pockets of the economy is expected to cool off, rent might just keep climbing.

The Federal Reserve, Biden administration officials, and much of Wall Street see elevated overall inflation eventually moderating as the economy settles into a new normal. The last inflation report, while stronger than expected, showed price growth picking up in services closely linked to reopening. The consensus holds that as such bottlenecks and pent-up demand fade, inflation should moderate, but “shelter inflation,” or rent, could be the big exception to that.

Rent prices are flashing “signs of more persistent inflationary pressures” on the horizon, Morgan Stanley economists said in a Sunday note. Shelter inflation – which covers rent and owners’ equivalent rents – is only just picking up after prices cratered through the pandemic.

Goldman Sachs echoed its peer in a Monday note, saying the “special factors” that held down shelter inflation during the health crisis will soon ease up and drive prices higher.

The shelter-inflation gauge is critical for broader inflation, since it represents “more cyclical, more persistent, and more inertial sources of price pressures,” Morgan Stanley said. And as shelter inflation accelerates through 2021, it could lead broader inflation to normalize above 2%, the team led by Ellen Zentner added.

Shelter inflation
Source: Goldman Sachs

Such an outcome could be worrisome for the Fed. The central bank has said it aims to let inflation run above 2% for some time before looking to pull it back to that threshold for the long term. Inflation settling above that level could force the Fed into an unforeseen corner.

Forecasts suggest soaring shelter inflation could also push inflation expectations permanently higher. Shelter prices are expected to grow 3.8% year-over-year by the end of 2022, Goldman economists said. Inflation will accelerate further and land above 4% in 2023, exceeding the highs of the last economic expansion.

With renters making up nearly one-third of the housing market, such strong inflation could spark intense price concerns. Elevated inflation expectations can drive real inflation higher, as businesses tend to raise prices and workers ask for higher wages when they expect price growth to accelerate.

Skyrocketing home prices could add to the sector’s price pressures, the team of Goldman economists led by Jan Hatzius said. A historic shortage of home inventory and surging demand led home prices to climb at their fastest-ever rate in February, according to the Federal Housing Finance Agency. Although home prices don’t directly affect shelter inflation, Goldman found that 5% to 15% of home-price growth eventually spills over into shelter inflation.

To be sure, shelter inflation counts for just 20% of the core Personal Consumption Expenditures index and 40% of the core Consumer Price Index, two of the most popular broad inflation gauges. It would take considerably strong shelter inflation to pull both indexes to worrying levels.

Still, the component is one to watch as the country reopens, Goldman said. The end of pandemic-era payment forgiveness will likely skew data later this year, as will a tighter labor market. If those factors can fuel stronger shelter inflation expectations, broad inflation could follow.

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Americans with more education are optimistic about the economy. The rest aren’t.

nevada las vegas coronavirus unemployment
Entertainment and events have come to a halt during the COVID-19 pandemic, highly impacting Las Vegas’ work force.

  • A Morning Consult analysis looked at consumer confidence throughout the pandemic.
  • It has a K shape like the wider recovery, with more educated Americans more confident about work.
  • The new stimulus could change this K shape, but may not solve things like delayed rent payments.
  • See more stories on Insider’s business page.

As the coronavirus pandemic disrupted life throughout 2020, economists debated the shape of the recovery from it. Would it be a V shape, a U shape, or even an L shape?

The answer that emerged was something different: A K shape, in which the well off recover like they’re in a V, and lower-income Americans never recover at all. President Joe Biden validated the diagnosis back in 2020, on stage during a presidential debate.

It stands to reason, therefore, that consumer confidence would follow the same K shape, but the results are nevertheless striking. A new analysis from Morning Consult, looking at consumer confidence throughout the pandemic, found lower-income Americans’ confidence in the economy dropped and stayed low during a slow rebound. Meanwhile, higher-educated Americans confidence rebounded like a V and continued to grow. In every state, people with bachelor’s degrees earn more than people without bachelor’s degrees.

John Leer, an economist at Morning Consult and the author of the analysis, told Insider that over the summer, people with bachelor’s degrees felt more confident that in their ability to hold onto their jobs and not lose pay.

The story was the opposite for others. At that point, Leer said, there’s a “real realization among lower-income workers that while they may have been able to hold onto their job to date, they’re much more likely to suffer a loss of pay or income sometime in the future.”

That divide only grew more K-shaped as the pandemic continued. A few months later, Leer said, those higher-educated workers’ confidence in their ability to hold onto their jobs translated into a willingness to engage in wage bargaining; they pushed for increases in their pay and benefits.

“The exact opposite” was true for lower-income Americans.

“If they had managed to hold onto a job, they certainly were not in a position to ask for an increase in salary or benefits,” Leer said.

He added: “What you see over the course of the past year is a really strong divergence in the degree to which Americans exhibit confidence in the economy, in their own personal finances, based on their level of education.”

K shape persists throughout rounds of stimulus

While the size of the first stimulus was “appropriate,” some snags with the rollout impacted confidence. Leer said lower-income Americans were less likely to have bank accounts or to have filed taxes in 2019 – meaning it took longer for the IRS to distribute money to them.

There was a similar phenomenon with states’ unemployment programs and getting money to unemployed workers, Leer said; Insider’s Allana Akhtar and Nick Lichtenberg reported that 35 different states ran into difficulties getting unemployment insurance to their jobless residents.

“As a result, we actually see confidence among those people with higher incomes rebounding a lot faster, because they were both more likely to receive the money they were due sooner, and, in addition, they were more likely to be employed in sectors that rebounded faster,” Leer said.

Notably, checks went out faster with the second stimulus, and confidence and spending grew – although higher-income Americans already had elevated levels of confidence.

“I view the recovery plan essentially as a lifeline for folks who are really struggling right now to make ends meet,” Leer said.

Prior research from Morning Consult found that the $1,400 stimulus checks in the $1.9 trillion stimulus package could help 22.6 million Americans pay their bills through July.

But when it comes to the K-shaped recovery, we’ll probably get a sense of how that’s playing out in September or October, according to Leer; it’ll mostly depend on what job recovery looks like.

“The gap in the so-called K-shaped recovery will depend on getting lower income and less well-educated workers back to work,” Leer said.

There’s also broader issues around what Leer calls “deferred liabilities” – the rent and mortgage payments that millions of Americans haven’t been able to pay over the past year. While the American Rescue Plan does offer billions in housing assistance, some progressives are saying it’s not enough to close the gap. Rep. Ilhan Omar of Minnesota just introduced the Rent and Mortgage Cancellation Act; she said that, currently, 12 million Americans owe $6,000 in back-rent on average.

To address this, Leer says “we have to be very honest with ourselves.” He said he would take an approach similar to a financial institution with someone who can’t pay back their debt.

“You’ve got to make some sort of calculated decision as to whether or not it’s reasonable to ask somebody to pay back what they owe,” Leer said. There could be families, he said, who haven’t been able to pay their rent for 12 months – and may not be able to for the whole pandemic.

“That sort of debt overhang is gonna slow down the recovery going forward. And I would hope that we as a country come up with some sort of solution to that.”

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