Rental Property Shortages Contribute To Record High Rents

A new report from the Commerce Department finds that rents have hit historic highs. Mary Louise Kelly talks to Redfin CEO Glenn Kelman about the state of the rental market.

MARY LOUISE KELLY, HOST:

To the economy now and whether it's time to say goodbye to an old rule of thumb, never spend more than a third of your income on housing. The number of Americans who spend more than that, in some cases, way more than that, is on the rise. And among the hardest hit are renters. A new report from the Commerce Department finds that rents have hit a historic high, back up to where they were during the housing bubble of 2008. Well, to find out why, we've called Glenn Kelman. He's CEO of the real estate company Redfin. And when we say rental prices are at historic highs, how high are we talking?

GLENN KELMAN: Well, some people are spending half of their income on rent, and that is just an unsustainable amount of money, especially for people who are older on a fixed income. So the challenge is that we just have to build more houses, build more apartments so that we can accommodate all the folks who need a place to live.

KELLY: And so one of the major, major factors here is there is not enough rental properties go around.

KELMAN: Yeah, well, what's interesting to me about that is that the laws of supply and demand seem to be broken. So rents and housing prices have been rising over the past three or four years, but inventory has been extremely low over that time. One of the big reasons is that the builders just haven't had the confidence to really borrow a lot of money and break ground on a lot developments. So you'll see urban infill, 20 or 30 units being added in the center of the city. But folks haven't been willing to go out to the edge of town for really large developments.

KELLY: Capital is part of the issue. Is part of the issue as well just access to skilled labor?

KELMAN: It certainly is. So the National Association of Home Builders, one of their top legislative priorities is immigration reform because we just need more skilled labor from outside the country. You'll see security guards at building sites who aren't really guarding the lumber. They're guarding the labor. They're preventing a recruiter from coming onto the site and taking the whole crew across the street to another place that's being built for an extra two bucks an hour. So there's a real challenge in finding skilled labor, and it's one of the reasons we have high rents now.

KELLY: Any end in sight or should we all just resign ourselves to living in our parents' basements for a while longer?

KELMAN: Every year, I say this is the year that more inventory is going to come online, and I think that's true in some cities, but others are really behind the curve. And some of that is because we have some not in my backyard folks who use zoning laws to really prevent dense housing. And that's what we need. We just need to accept the fact that more American cities are going to become a little bit more like Manhattan, or we literally won't have anywhere to put people.

KELLY: Glenn, thanks so much.

KELMAN: Thanks for having me.

KELLY: Redfin CEO Glenn Kelman talking us through new data on why rents are so darn high.

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