The continued demand for rental housing has caused rents to rise, affecting many tenants across the U.S. and Canada. Though rent increases have eased, the relief isn’t evenly distributed everywhere.

SingleKey asked more than 900 renters if rising rents discouraged them from moving to a new place, and most renters responded that it has. Learn more about what’s behind the rise in rents and how landlords can increase rents sensibly.

Are current tenants reluctant to move due to rising rents?

SingleKey survey results cited that 80% of renters felt discouraged from moving to a new place due to rising rents. Only 20% of renters responded that they do not feel dissuaded from moving.

According to Zillow, the asking price for rent between May and June in the U.S. increased by 0.6%. Vancouver’s rental market experienced a 12% increase from the previous year. Toronto’s rent prices for a one-bedroom apartment increased by 27% compared to last year. Most of the rental market’s prices have risen since 2021. 

Why are renters reluctant to move? 

With a scarce housing supply, expensive housing costs, high property taxes, and mortgage interest rates, more renters are taking a wait-and-see stance before relocating or buying homes, which could be why some renters are reluctant to move.

The median rent price growth has caused many renters to stay put in addition to high interest rates. In August 2022, the U.S. inflation rate fell to 8.5%. In August 2023, the U.S. inflation rate hit 3.2%. Canada’s inflation rate in August 2022 was 7.6%. Today, Canada’s inflation rate is 3.3%.

In the U.S., the Federal Reserve’s 2% target means the interest rates will remain high. Interest rates will need to be increased to prevail over inflation, so if renters want to purchase homes or get a loan, the rates will be high. These factors contribute to a renter’s reluctance to move, especially if they live in an affordable unit governed by rent control laws.

What causes mass rental price increases?

There is a combination of factors that can cause rents to climb across the U.S. and Canada, including:

• Demand for housing
• Population growth
• High mortgage rates
• Housing shortage in real estate
• Unexpected inflation
• Higher costs for building and maintenance

These components combine to drive up rent and keep renters from buying homes. When the economy is beginning to grow, mortgage rates can increase. The thirty-year mortgage rate was raised to 7.09% in August 2023  in the U.S.. In Canada, the national median rent for a one-bedroom in July was $1,833, as reported by Zumper. In the U.S., the median national rent for a one-bedroom in July was $1,506. 

When can landlords increase the monthly rent?

Generally, landlords who oversee fixed terms or month-to-month leases can only increase the rent once per year. However, this rule changes depending on where they manage the rental.

Many regions in the U.S. and Canada have annual rent increase limits, with some exceptions to that rule. For instance, property managers can raise the rent substantially if a current tenant moves out, applying the initial rent to charge new prospective tenants. For those considering managing properties in California, learn about the standard rules and unique exceptions regarding rent increase limits.

In other places, like Alberta, landlords cannot increase the rent on rental properties during the fixed term. However, once the fixed term expires, there is no limit to how much a landlord can raise the rent on current tenants.

As long as landlords follow the federal and local reforms, they can continue raising rent annually. 

What are other economy-related reasons that cause rents to soar? 

When the housing market has a tight supply and mortgage rates increase, this can affect affordable housing in both the rental and housing markets. There’s also inflation to consider, which is a general increase in the price of goods and services.

When there is a supply shock, like the oil crisis in the 1970s, or a low housing supply, the demand affects the cost of goods and labor, housing prices go up, and supply and demand affect those managing rental units. If the demand for housing outstrips the supply, maintenance costs increase. Landlords must cover higher living costs, repairs, and property taxes during inflation.

Small-time landlords or those managing multiple properties are both affected by inflation. To protect themselves against the effects of inflation, all landlords must ensure the new market rents cover their expenses. During unexpected inflation, a landlord’s expenses increase, and their cash value decreases, so they often strive to break even by raising the rent costs. Learn more about how to raise rents with your tenants. 

How can landlords attract quality tenants and retain them?

Landlords should always screen rental applicants to attract their ideal tenants. A tenant screening report will help landlords verify income sources and collect other background information to ensure their tenants can cover the cost of rent. Screening tenants will paint a big picture of how responsible prospective tenants are in all areas. Learn to screen tenants from the pre-screening to the approval process. 

FAQ: Are rising rents discouraging renters from moving to a new place?