By Shereen Siewert
Monthly rent in Wausau rose sharply this month, burdening households, fueling overall inflation and forcing many residents to reassess their living situations.
Over the past month, the average rent for a one-bedroom apartment in Wausau increased by 40% to $830, and the average rent for a 2-bedroom apartment increased by 5% to $1,099, according to data released Monday by Zumper, a rental marketplace website. The skyrocketing prices were fueled by rising demand throughout the metro area that diminished an already low supply of multi-family housing, further inundated by labor and supply shortages delaying new construction.
Katie Thomas, a single mother who graduated in 2020 with a bachelor’s degree in finance, said she was already spending more than half of her salary earned at a local bank on rent payments when she was notified in December that her rent will increase Feb. 1. The additional $200 per month feels beyond her reach, but Thomas said she hasn’t found any suitable living arrangements for less than $1,250, the amount she’ll be paying when her lease is renewed.
“I already work full-time,” Thomas said. “With a daughter at home, anything I’d make with a second job would be eaten up by child care costs. Right now I just feel helpless, like things will never get better for us.”
Wausau is not alone in seeing such a dramatic rise. Rents have risen 12% over the past year nationwide, an increase economists say is enough to wipe out any modest raise most people have gotten in their paychecks. The most recent Bureau of Labor Statistics data show Wausau residents have seen a bump in pay over the past year of about $100 per week, but the increase in the metro area is significantly smaller than for Wisconsin residents overall.
Compounding the issue are additional demands that are stretching budgets such as higher heating bills, higher home insurance premiums and an auto market in which the cost of a used car can be higher that of a brand new one. And when people begin paying more than half their salary in rent, they no longer have money left over to put back into the local economy by visiting restaurants or attending events, said Kristen Euretig, certified financial planner and founder of Brooklyn Plans. That, Euretig said, can lead to credit card debt.
Many factors are driving the rent surge including a short supply of housing inventory. Renters who stayed with family members early on in the pandemic are now driving new demand for apartments, while landlords who gave discounted rents to new tenants or forgave missed payments are seeking to recoup their losses. Rental demand is also soaring due to high prices in the for-sale market, up nearly 20% year-over-year.
Economists say when rent goes up, it rarely comes down, especially with apartment occupancy rates also hitting peaks. In 2020, Wausau saw a modest drop in apartment rental costs and the apartment vacancy rate rose to about twice what it is today.
Economists say higher rent prices will be a key driver of inflation in 2022. Housing costs make up about one-third of the U.S. Consumer Price Index, which uses going rate of home rentals as a key calculation. With a lag of between 9 and 12 months before rising rents show up in inflation measures, those higher rent prices could keep inflation at elevated levels throughout the year, said Frank Nothaft, chief economist at real estate data firm CoreLogic.
Like Thomas, about one in four renters spend more than half of their monthly income on rent, a Harvard University Joint Center for Housing Studies analysis shows. Experts say that because the most recent data, from 2018, is pre-pandemic, the figure is probably even higher how.
For years, economists have recommended that no more than 30% of income should be spent on rent. But that rule of thumb goes out the window when prices rise so quickly. The rule was a calculation that is rooted in 1969 public housing regulations.
“Even before the pandemic, rental prices were pretty high up there,” said Jung Choi, senior research associate with the Housing Finance Policy Center at the Urban Institute. “The pandemic has just made things worse.”
But for some people already living in high rent areas who are working remotely, Wausau’s rental picture seems reasonable, even without the amenities a big city can offer. Rowan Flynn, a 25-year-old Wausau native living in Salt Lake City, said he’s giving strong consideration to moving back to the area after learning his $1,750 monthly rent for a one-bedroom apartment will increase by $250 in March.
“Still, the rent prices in Wausau aren’t all that much less than Salt Lake City and there’s a lot less going on,” he said. “I don’t know if I can wrap my head around that.”
Financial experts say not to expect an end to rising housing costs anytime soon. The Federal Reserve Bank of New York said in research released in November that Americans on average expect rents to rise more than 10% over the next year, the highest reading in the survey’s history.
“We could face an economy a year from now where some of the supply chain disruptions are going to ease [and] price growth will ease,” Robert Dietz, chief economist at the National Association of Home Builders, told Politico. “But housing is likely to be the one where we are going to continue to see cost growth, and that will have an impact on households.”
