Rent prices are helping to fuel inflation, new government data shows, seeing their largest monthly increase in more than three decades.
The consumer price index jumped by a stunning 9.1% in June from a year earlier, according to a Wednesday report from the Bureau of Labor Statistics. And while a lot of the blame is being placed on soaring gas prices — the overall energy index accounted for almost half the increase in inflation from May to June — housing costs are fanning the flames too.
Rent prices rose by 0.8% in June from a month earlier, according to the Labor Department, the biggest monthly gain since 1986. Over the past 12 months, meanwhile, rents are up by 5.8%.
The data likely come as no surprise to the 36% of American households that rent.
The national median monthly asking rent passed $2,000 for the first time in May, according to data from Redfin, increasing by 15% from a year earlier. Some renters are now facing eviction due to nonpayment, or are spending an unsustainable amount of their income on housing to get by.
Some people are even surrendering their pets to animal shelters due to problems with housing affordability, as MarketWatch reported earlier this week.
Despite the pain tenants are facing, it’s unclear that they’ll get relief in the near term — which could make it more difficult to curb inflation. Thanks to higher mortgage rates, would-be homebuyers might stick on the sidelines and decide to rent for a while longer, increasing demand for an already-tight supply of units, economists say.
“There are considerable headwinds in the Fed’s fight against inflation. Notably, the data used to calculate shelter inflation, which accounts for about 40 percent of Core CPI (excluding food and energy), is meaningfully delayed by approximately six to twelve months,” Mark Fleming, the chief economist at First American Financial Corp., said in his commentary ahead of the report’s release. “This means that the rapid growth in rent expense over the last year is only now beginning to hit the headline CPI figure.”