Rising Rent Helping to Drive Inflation Higher

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LINDA WERTHEIMER, host:

There is something else that's going up in price besides food and energy and that is rent.

After falling as recently as 2002, apartment rental rates are rising, especially in already high-cost areas.

More from NPR's Jack Speer.

JACK SPEER reporting:

Like many cities, Washington, D.C. has seen a construction boom in recent years. Lots of new condos. Lots of luxury apartment buildings. But even with the increase in supply, prices have been going up.

Showing off a one-bedroom apartment with den, marketing manager Alicia Panyard points out some of the apartment's features.

Ms. ALICIA PANYARD (Marketing Manager, Meridian at Gallery Place): This is an example of a glass-enclosed balcony. I was saying all of the windows go to the ceilings.

SPEER: Apartments in the Meridian at Gallery Place start at $1,600 a month and go to as much as $3,200 a month, and there are plenty of takers. The building is 95 percent occupied.

Property manager Paige Hughes says their rental rates have risen substantially over the past year.

Now what would this apartment, roughly, go for?

Ms. PAIGE HUGHES (Property Manager at Meridian at Gallery Place): 2450 for this particular unit. That increased, oh, wow, 2225 for the same floor plan.

SPEER: That's an increase of $225 a month since last year.

Mark Zandi is with Moody's Economy.com. He says it's not just expensive cities like Washington, D.C. where rents are rising.

Mr. MARK ZANDI (Analyst, Moody's Economy.com): With the higher interest rates it no longer is affordable for many people to buy a single family home, so rental demand has increased quite substantively. Vacancies have fallen, landlords now have some power and they're using it. They're raising rents on their units, and quite significantly. We're seeing rent increases of 5 to 10 percent in many key markets across the country.

SPEER: But there is tremendous variation from market to market. Cities in Florida and California show the biggest increases, but according to one survey, rents were still flat or falling in Denver, Omaha, and Charlotte.

Another survey indicates that when you average what's going on around the country and you examine what people actually pay, rents are going up about 3 percent, about the same as the government's main inflation gauge, the consumer price index.

And while some consumer prices, including rents, are rising, there are some economists out there who wonder what all the fuss is about. Jim Glassman is with JP Morgan Chase.

Mr. JIM GLASSMAN (Managing Director and Senior Policy Strategist, JP Morgan Chase & Company): Most people have the perception that, well, things must be up because they see gasoline is up. But the truth is, your computer prices are not up, they're down. Apparel is down from where you would have bought it several years ago, because a lot of it is made in China.

In a dynamic economy, lots of things are up and lots of things are down. And broadly, it's a pretty tame story.

SPEER: We'll know a lot more about whether inflation will be tame or on a tear when the consumer price index is released tomorrow morning.

Jack Speer, NPR News, Washington.

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