Latest / Inflation and Your Money with Fexingo: Protecting Purchasing Power and Beating Inflation / Why Your Rent Is Rising Faster Than Inflation
Transcript
- Lucas: If you rent, you've probably noticed your lease renewal came back higher than the inflation headlines would suggest. And you're not imagining it. Luna: Yeah, CPI was at 3.1 percent core in April, but my own rent jumped almost six percent. That gap feels personal. Lucas: It's not just you. The shelter component of CPI — which is mostly rent and owners' equivalent rent — was up 5.2 percent year-over-year in the April report. That's nearly double the core inflation rate. And shelter carries a huge weight in the index, roughly a third of the basket. Luna: So the headline number is actually being pulled down by other categories — goods, energy, used cars — while housing costs keep climbing. Lucas: Exactly. And there's a structural reason that matters for the Fed. The central bank watches core PCE more closely than CPI, but shelter is still the biggest single component. As long as rents keep rising at 5-plus percent, it's going to be hard to get inflation down to that 2 percent target. Luna: But the conventional wisdom was that rents would cool off by now. New apartment supply was supposed to catch up after the building boom of 2021 through 2023. Lucas: That supply is coming online, but it's hitting a wall of demand. Look at the multifamily starts data from late 2024 and early 2025 — they dropped sharply because financing costs went up when rates stayed higher for longer. So the pipeline is thinner than expected. Meanwhile, we've got demographic tailwinds: the oldest millennials are still forming households, and younger Gen Z renters are flooding into cities. Luna: So the supply that was supposed to tame rent growth is arriving into a market that's even more competitive than forecasters assumed. Lucas: Right. And there's another layer: dynamic pricing software. About 25 to 30 percent of large multifamily landlords now use revenue-management algorithms — similar to what airlines use — to adjust rents daily based on occupancy, comparable listings, and even the time of year. That's been shown to amplify rent increases in tight markets. Luna: There was a big ProPublica investigation on that a couple years ago, and I think the DOJ even filed a lawsuit against one of the providers — RealPage, I think? For alleged price coordination. Lucas: Yeah, RealPage's YieldStar product. The case is still ongoing. But the software isn't illegal per se — it's the sharing of proprietary data that raises antitrust concerns. Regardless, the effect is that in markets where a lot of properties use the same algorithm, rents tend to move in lockstep upward. Luna: So if you're a renter in, say, Phoenix or Atlanta or Nashville, you're getting hit by both the supply-demand imbalance and algorithmic pricing on top of it. Lucas: Exactly. And that's where the Sun Belt markets have seen some of the biggest rent spikes. But here's the counterintuitive part: in a few of those markets — Austin, for example — new supply actually surged, and rent growth has started to decelerate. Austin saw a 12 percent increase in multifamily inventory in 2024, and year-over-year rents there are now only up about 2 percent. Luna: So it's not uniform. The places that kept building are seeing relief. It's the markets where local zoning or NIMBY resistance choked off new construction that are still getting squeezed. Lucas: That's the key insight. The cure for high rents is, boringly, more housing. But getting that built takes time — especially when interest rates are still above 6 percent on commercial construction loans, and when land-use regulations add years of entitlement delays. Luna: And the Fed's rate pause isn't helping on that front. If rates stay where they are, developers can't pencil new projects. So the supply crunch persists. Lucas: This is actually a place where our listener support makes a real difference. We keep the show free and ad-free because of people chipping in a couple dollars a month at buy me a coffee dot com slash fexingo. It's not a big ask — but it genuinely helps us keep digging into topics like this that affect your actual wallet. Luna: Yeah, and if you've ever gotten a useful tip from one of our episodes, that's the way to pay it forward. No pressure, but every bit counts. Lucas: Alright — back to rents. So if you're facing a renewal soon, what can you actually do? First, check what comparable units in your building or neighborhood are listed for right now. If your landlord's proposed increase is way above market, you have leverage. Second, consider a longer lease — say, 18 or 24 months — if your market is still seeing high rent growth. You lock in today's rate and avoid next year's hike. Luna: And third: if you're in a market where new supply is coming — like Austin, Raleigh, Denver — you might be able to negotiate a smaller increase just by threatening to move. Landlords hate turnover costs. Lucas: The data backs that up. A 2025 study from the National Multifamily Housing Council found that the average cost to turn a unit — cleaning, painting, lost rent during vacancy — is about $3,500. So a landlord would rather cut your increase from 6 percent to 3 percent than lose you entirely. Luna: That's a concrete number to bring to the table. 'I know it costs you three and a half grand to replace me, so let's split the difference.' Lucas: Exactly. And this is where the inflation data becomes actionable. The shelter component of CPI is a lagging indicator — it reflects what rents did over the past 12 months, not what they're doing right now. Private-sector rent indexes from Apartment List or Zillow show that asking rents nationally were only up about 3.5 percent year-over-year as of May 2026. That's softer than the CPI shelter number. Luna: So the official CPI might be overstating current rent inflation because of that lag. Your landlord might be trying to use old data to justify a bigger increase than the market actually supports. Lucas: Precisely. So go in armed with the real-time comps. And if you're in a rent-controlled city — New York, San Francisco, Los Angeles — make sure your increase falls within whatever the local rent board allows for 2026. Those caps are often tied to CPI, but with nuances. Luna: In New York, for example, the Rent Guidelines Board just proposed a 3 to 4 percent increase for one-year leases this year. That's below the CPI shelter number, but above the 2.5 percent they allowed in 2025. Lucas: So the trend is still upward, but there are pockets of softening. The big risk going forward is if the Fed cuts rates later this year — that could reignite demand from both homebuyers and developers, which might push rents back up. But for now, renters have a narrow window to negotiate. Luna: And that's the frustrating part: the thing that's supposed to make housing more affordable — lower rates — could actually make it less affordable in the short term by boosting demand. Lucas: That's the paradox. The only durable solution is supply. And that's a long game. In the meantime, know the numbers, know your leverage, and don't accept the first renewal offer as final. Luna: Good advice. I'm going to check my own renewal notice with fresh eyes. Lucas: Let us know how it goes. We'll be back next week with another angle on inflation and your money.