Bid to rent a house? It’s an unexpected tactic in a competitive market.

By Judy J. Beasley Last updated Dec 18, 2022

The licensed practical nurse could not afford a $400 increase in her rent. So she started looking for a new place.

She wanted to rent a three-bedroom house for herself and her two children and could pay up to $1,400 a month. She had always paid her rent on time and her landlord had written her a letter of recommendation. But as she searched in Philadelphia and Delaware County, she received rejection after rejection, said Liora Israel, a real estate agent with Philadelphia-based eXp Realty who was helping her.

“In two weeks, I showed my client 44 houses and applied for about 30,” Israel said. “And that’s not an exaggeration.”

Her client lost out to people who applied before her and to others willing to pay more than the advertised rent. For a property listed at $1,200 per month, the owner went with someone who offered $1,700.

“I literally broke down and cried with my client,” Israel said.

In the recent competitive market, homebuyers have often found themselves in bidding wars over a limited supply. But rental demand is also strong and potential tenants are now scrambling, especially those looking at the bottom of the market.

A Facebook post Israel wrote in frustration about his client’s situation has been shared by more than 16,500 people, and rental property owners are asking for help. One told Israel she was “heartbroken” over the post and offered a home in Roxborough that she had planned to rent on Airbnb. The client from Israel signed a lease for $1,450.

Israel has seen bidding wars for rentals in small properties since the start of the pandemic, she said.

“It was nothing I had ever seen before,” she said, “and it was crazy.”

It got worse. Although rental auctions do not appear to be a widespread problem, last year about a dozen Israeli customers were invited to bid for rentals.

Danielle Hale, chief economist at Realtor.com, said she was surprised when she started hearing about rental bidding last fall. But here and across the country, the low supply of available rentals is paving the way for desperate acts.

The rental vacancy rate in the Philadelphia metro area in the first quarter of this year was 4.2%, according to Realtor.com. That’s down from 6.3% in the same period last year.

“In a competitive market, people are looking for every way to stand out and increase their chances of being the only one to get the rental, just like we see in the sales market,” Hale said.

As rents continue to rise, struggling tenants, who typically have to pay a few months’ rent at a time, are already stretching their budgets in search of accommodation. They don’t have the money to offer higher monthly payments – if they can even find a place.

Tenants who can’t find housing take rooms, sometimes in illegal rooming houses, said Rachel Garland, attorney-in-charge of Community Legal Services of Philadelphia’s housing unit. Or they are hang out with family, live in cars and turn to emergency shelters. Some pay for stays in Airbnbs and hotels, which is more expensive than renting.

“It’s almost impossible for our customers to move right now,” Garland said. The rental environment has deteriorated during the pandemic, she added. “We have never seen it be so difficult.”

The usual 60 to 90 days notice to move out “is no longer a realistic time frame for tenants to move out,” she said. Renters on housing assistance have even more difficulty finding homes in their price range. Tenants with disabilities who require accessible housing also face additional challenges. Some Community Legal Services clients searched for six months.

Although rental property landlords turn away many clients because of bad credit or previous evictions, Garland said, “It doesn’t surprise me that tenants who are perfect from a landlord selection perspective also have trouble” finding a home.

High house selling prices prevent some tenants from becoming landlords. College graduates temporarily living with relatives and tenants who postponed their move earlier in the pandemic are resuming their plans. More and more tenants are being evicted and looking for new homes. More and more people live alone.

And some small rental property owners, especially those who have struggled during the pandemic, are choosing to exit the business and list their rentals for sale in today’s strong sellers market.

“The rental market is very scary and especially scary for people who have market-priced housing on the lower end of the spectrum,” said Rachel Falkove, executive director of the nonprofit Family Promise of Philadelphia, formerly known as the Philadelphia Interfaith. Hotel network.

Nationally, the median rent hit $1,827 in April, up 21% from April 2020 and nearly 17% from April 2021, according to a report by Realtor.com. It is on track to surpass $2,000 by August. April marked the 14th consecutive month of record median rents. In the Philadelphia metro, the median rent is $1,775, up nearly 8% from a year ago.

As inflation drives up the prices of everything, around two-thirds of tenants say the biggest strain on their budget is rising rents, according to a Realtor.com survey of more than 2,400 tenants and owners published this month.

In addition to charging more simply because people will pay, owners are also responding to the pressure of higher operating costs. Nearly three-quarters of rental property owners surveyed plan to increase rents in the next 12 months for at least one property.

” READ MORE: Tenant Rights Guide: Rent Increases

“We had people paying 50% to 60% of their income for housing,” Falkove said, “and the rates are going up.”

As rents go up, some tenants who have lived in their homes for years and want to stay there are seeing their prices go down. Seniors and other tenants on fixed incomes are particularly vulnerable. Tenants seek help from organizations such as Family Promise when they cannot find new homes.

A woman who was previously homeless moved her family out of their four-year-old apartment instead of renewing her lease due to mold and maintenance issues, Falkove said. She thought they would live in a hotel for a week or two while she found another place.

“It’s been a few months,” Falkove said.

The woman ran out of money. The nonprofit has the family in a temporary, month-to-month tenancy.

June 2020 was the first time Israel from eXp Realty experienced a rental bidding war. After her aunt asked for a townhouse in Sicklerville, the listing agent said a lot of people wanted it and some had offered more than the asking price.

“And I was like, ‘What? On rent? No way,'” Israel said. His aunt offered an extra $200 a month. But someone had already gone over that.

A few weeks ago, Israel’s brother found a house in Delaware County with advertised rent of around $1,400. After applying, Israel said, the property manager said someone had offered up to $1,875 a month. So could he beat that? He kept looking.

The question is familiar to Paula Wall, who reviewed apartments across the region at the start of the pandemic. A landlord who had listed a two-bedroom unit for around $1,400 told her that a couple was willing to pay more. Wall offered $50 more per month, but the landlord chose a tenant who could pay $100 more. It happened several times.

” That does not make sense. It’s not like a house you buy,” she said. “Don’t take me there and say, ‘Somebody else is bidding more than you. “”

Discouraged by the rental market, she decided to try buying her first home.

Wall, 62, who has adult children, lives with her family in a Maple Shade apartment while she continues to improve her credit and works with a financial adviser. She also has two daughters aged 5 and 6 that she adopted a few years ago. She wants a yard they can play in and a property she can leave to them.

“I gave myself a year to have a home,” she says. “So next year I want to be home.”

The Philadelphia-based Tenant Union Representative Network hasn’t heard that rental auctions are a widespread problem, but executive director Nicole Lawrence said she got a call about someone outbidding for an apartment in Lansdowne.

“The sad reality” is that rents go up as neighborhoods gentrify and the cost of living rises, Lawrence said. “I think the situation will get worse, not better.”

Realtor.com’s Hale said she expects rent growth to at least slow, as it has done slightly throughout the year.

“We are going in the right direction, but not very quickly,” she said. “There is light ahead of us, but it will always be a tough market.”

The Philadelphia Inquirer is one of more than 20 news outlets producing Broke in Philly, a collaborative reporting project about solutions to poverty and the city’s push for economic justice. Find all our reports on brokeninphilly.org.