High Housing Costs Could Keep Inflation Rising

As reported by Coral Murphy Marcos, Jeanna Smialek and Jim Tankersley in the New York Times, "[t]he rental market, which slumped during the pandemic, has snapped back more quickly than many economists predicted, and renters across the country are facing sticker shock." According to Zillow data, "[r]ents last month rose 7 percent nationally from a year earlier." If these increases continue, "it could be bad news both for those seeking housing and for the nation’s inflation outlook. Rental costs play an outsize role in the Consumer Price Index, so a meaningful rise in them could help keep that closely watched government price gauge, which has picked up sharply, higher for longer."

While "Mr. Biden’s $4 trillion economic agenda includes $213 billion to help jump-start more affordable housing," that funding was "not included in the bipartisan infrastructure agreement that he struck with centrist lawmakers." Regardless, these efforts could take years to impact actual households. "Administration officials say they are watching housing prices and their effects on inflation. They continue to insist that most of the price pressures in the economy are temporary. The officials, and President Biden himself, have also pushed for additional spending measures that would over time increase the supply of housing and, the officials say, hold down rental increases, spikes in housing prices and inflationary pressure."