Two Main Reasons for Rental Price Increases in Central Florida
Contrary to popular belief, current rental increases are not simply due to landlord greed. Among the factors driving these trends are the extreme Covid-19 measures and high taxes in other states, lack of available inventory, and the newest band member, inflation.
Over the past two years, local housing demand in Central Florida has risen exponentially due to several factors. For one, extreme Covid-19 measures and high taxes in other states have prompted many people to leave those areas and relocate to Central Florida. In addition, given its warm climate and abundance of recreational activities, Central Florida has become an increasingly popular destination for those relocating. These factors have created an extremely competitive real estate market where low inventory and high rents pressure home buyers and renters alike. Despite these challenges, however, many developers are racing to build new homes and fill this gap, as they recognize the tremendous potential that lies within this highly sought-after region. Unfortunately, new constructions don’t come at bargain prices. Construction material costs are up year over year from 2020 to 2021. This fact brings us to our next cause of rental increases: inflation.
There has been a significant increase in construction material costs in recent years, with prices rising an average of 17.5% from 2020 to 2021, the largest year-over-year increase since 1970, according to the US Census Bureau. Also, the annual inflation rate is 8.5% for the 12 months ended March 2022, the largest since December 1981. This rise in costs affects home rental prices and new construction projects, as builders and landlords struggle to keep up with inflationary pressures.
In particular, higher material costs have significantly impacted the construction industry. The cost of building materials, such as concrete, steel, lumber, and glass, has increased dramatically over the past year due to inflation in energy and food prices. Because new buildings rely heavily on these materials, contractors struggle to maintain profitability amid rising costs. As a result, they often have no choice but to pass these higher prices on to their customers by raising rental rates or cutting back on construction expenses.