Looking back at the pandemic, I’ve realized that not only homeowners but renters also had their fair share of wins. I’m not talking about those who stopped paying rent while still having a job, or those who managed to negotiate lower rents or find cheaper places. I’m referring to the majority who kept paying their regular rent, including the scheduled increases, from March 2020 to May 2023, when the pandemic officially ended.
These renters got more bang for their buck, between 14% and 50% more value for their rent over three years. How? They spent more time at home due to lockdowns and work-from-home policies, which means they got more use out of their rented space.
As a landlord, one of my concerns is wear and tear. The more time tenants spend at home, the more wear and tear on the property. This includes damage to walls, appliances, countertops, floors, carpets, plumbing, doors, paint, and HVAC systems. More time at home also means more potential liability issues, like fires from increased cooking or smoking, or damage from having more visitors.
Before the pandemic, most people spent about 14 hours a day at home and 10 hours outside, giving a utilization rate of about 58%. But post-pandemic, people spent more time at home, increasing the value they got from their rent. On the flip side, landlords saw a decrease in returns due to increased wear and tear.
When the pandemic hit, most tenants’ utilization rate jumped to over 87.5% for all of 2020. Even with the introduction of the vaccine in spring 2021, many companies continued their work-from-home policies, keeping the utilization rate high. Even now, many companies still have work-from-home or hybrid policies, so the utilization rate remains above 65%.
So, renters got more value for their money. In 2020, they got 50% more value; in 2021, 43% more; in 2022, 28% more; and in 2023, 14.2% more. This increase in value is similar to the range of home price appreciation during this period.
In addition to getting more value, financially savvy tenants could have invested their savings in the stock market, real estate stocks, private real estate funds, and alternative investments. Despite a bear market in 2022, risk assets have mostly increased since the start of 2020.
It’s rare for both homeowners and renters to win, but that’s what happened during the pandemic. Renting isn’t throwing money away; it’s paying for shelter. And with the increased utilization rate, renters got more value for their rent for several years.
In the long term, rents will likely increase to cover the additional wear and tear costs. But market forces might take years to play out, especially with mom-and-pop landlords. So, if you’re a renter, feel good about the deal you got!
As for homeowners, the demand for homes has likely permanently increased due to the continuation of work-from-home and hybrid work policies. So, homeowners should continue to benefit from home price appreciation in the long term.
I’d love to hear from renters who feel good about getting more shelter for their rent. And landlords, have you noticed an increase in wear and tear during the pandemic? How do you plan to cover these extra costs going forward?
One way for renters to keep up with real estate prices is by investing in real estate. Instead of buying a primary residence, you can invest in private real estate funds.
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