Rents Are Outpacing Inflation While Landlords Say They’re Squeezed: What’s Really Going On?

Rent growth vs. inflation: what the latest data shows

Recent consumer price index data show that nationwide rent prices were up about 3.5% year over year as of early fall, still ahead of overall inflation.[nerdwallet.com] That gap means renters are seeing housing take a bigger bite out of their budgets even as headline inflation cools.

It’s also a reminder that "shelter" in the inflation data tends to move slowly. Many tenants are on yearlong leases, so rent changes filter into the index with a lag. In fast-changing markets, private listing data can show a slowdown or surge months before it shows up in government statistics.[nerdwallet.com]

Behind the national average, local conditions vary widely. Some Sun Belt markets that saw explosive rent growth during the pandemic are now cooling, while coastal cities with strict land-use rules and limited new construction remain pricey. Within each metro, regulated units, older walk-ups and new luxury buildings can all follow different price paths.

Why landlords say they’re not winning despite higher rents

On paper, rent growth that beats inflation sounds like a clear win for landlords. But many owners, especially of older or regulated buildings, say the math is more complicated. Operating costs have climbed faster than usual in recent years, from insurance premiums and utilities to labor and materials for repairs.

For smaller landlords who rely on a few units for income, a big roof project or boiler replacement can wipe out several years of modest rent increases. If local rules limit how quickly they can raise rents on existing tenants, they may not be able to pass through costs right away. That’s one reason some owners argue that higher headline rents don’t automatically translate into higher net income.

Financing costs are another pressure point. Owners who bought or refinanced when interest rates were low now face much higher borrowing costs when loans reset. For buildings with thin margins, a higher mortgage payment can push annual cash flow close to zero unless rents rise sharply or expenses fall.

New York’s rent-regulated stock: affordability vs. building health

Nowhere is this tension more visible than in New York’s rent-regulated housing. Rent-stabilized apartments are among the city’s most affordable rentals, typically offering below-market prices and strong tenant protections.[nytimes.com] For many longtime residents, they are the only way to remain in their neighborhoods.

But many owners of these buildings say that limits on rent increases have not kept pace with rising expenses. Insurance, property taxes, fuel and maintenance have all become more expensive, while allowable rent bumps are capped at a few percentage points per year.[nytimes.com] Some landlords argue that this leaves little room to fund major repairs or capital improvements without dipping into reserves.

Tenant advocates counter that these buildings have benefited from steady occupancy and decades of rent payments, and that loosening limits on increases would undercut one of the city’s last remaining sources of relatively affordable housing.[nytimes.com] The result is a standoff over how to balance building finances with long-term affordability and habitability.

In practice, underfunded repairs can show up as slower response times, deferred maintenance and growing backlogs of work orders in older buildings. Over time, that can affect living conditions as well as the long-run viability of the housing stock.

San Francisco’s new "landlord’s market"

On the other side of the country, San Francisco offers a different example of how rent growth and landlord finances can diverge. After several years of weakness early in the decade, the city’s rental market has snapped back. Asking rents for some apartments have climbed around 11% year over year, and agents report bidding wars returning in popular neighborhoods.[sfchronicle.com]

That shift has given landlords more leverage when choosing tenants. With multiple qualified applicants competing for the same unit, some are offering above-asking rent, extra months of rent upfront or stronger financial documentation to stand out.[sfchronicle.com] For renters, that can make moving more stressful and expensive, especially for those without high incomes or savings.

Yet even in a so-called "landlord’s market," owners face constraints. Local rent regulations still limit increases for many existing tenants, and high construction and labor costs make adding new supply expensive. Vacancy risk also looms: if rents climb too quickly, more renters may double up, move farther out or leave the region entirely, weakening demand.

What this tension means for renters and small landlords

For renters, the combination of rent growth above inflation and landlord cost pressures means there is no simple story of winners and losers. In high-cost metros, many tenants face rising rent burdens while some landlords say they are struggling to keep buildings in good repair without overleveraging or raising rents sharply between tenancies.

One takeaway is that housing policy that focuses only on headline rent growth can miss what’s happening to the underlying stock. Protecting affordability for tenants while allowing enough revenue for owners to maintain and upgrade buildings is a difficult balance. Strategies can include targeted subsidies tied to repairs, clear standards for habitability and transparent formulas for allowable rent increases.

For small landlords, planning around higher and more volatile expenses is critical. Stress-testing cash flow under different rent and interest-rate scenarios, building larger maintenance reserves and understanding local rules on rent increases and vacancies can reduce the risk of being caught off guard.

For renters, carefully reading lease terms, tracking local vacancy trends and comparing renewal offers to new listings nearby can help in negotiations. In tight markets like San Francisco, being prepared with documentation and a clear budget is key; in softer submarkets, asking for modest concessions or smaller increases may be more realistic.

Over time, easing land-use barriers, encouraging a broader mix of housing types and targeting help to both cost-burdened renters and financially stressed buildings could relieve some of the pressure. Until then, the disconnect between rent inflation and landlord finances will likely remain a defining feature of the rental landscape in expensive cities.