Average rent prices in the New Orleans Metro are up 8% in the last six months, tied for the fastest growth in rent prices in the nation during that period. That’s according to data from Apartmentlist.com.
A UNO economist told WWL that this surge threatens to squeeze out service industry workers who are vital to the city’s tourism economy. Dr. Walter Lane noted the formula for housing spending is that you shouldn’t spend more than 50% of your income on rent. Nationwide, and locally, many are now spending over 60%.
“If you are spending 60% then that doesn’t leave you much for all of the other things that you have to buy,” said Lane who pointed out that while wages are also rising, they aren’t rising at near the rate of rent.
Nola.com reported this surge in rent prices is causing a lot of friction between renters who say they’re getting a raw deal and landlords who say they’re just reacting to inflation.
So, where’s the squeeze coming from? Lane said it’s largely outside money, wealthy people from the coasts buying second homes in New Orleans with straight cash, and investors snatching up starter homes to convert into Air BnBs. As these forces apply pressure from the top, that restricts supply farther down the chain. People in starter homes can’t upgrade, renters looking to purchase can’t afford a starter home, and working-class renters at the bottom of the chain are left scrambling in a much tighter and more competitive market.
Lane said tourism and service jobs are often in the most desirable neighborhoods, and as those areas become less affordable those key workers have to live further and further away from their jobs. Eventually, the dam may break, and the workers who propel the city’s tourism economy could just leave.
“New Orleans East is still fairly affordable, though for some people that’s a fairly long bus ride,” said Lane.
Can anything be done to reverse this trend, or at least slow down surging rent prices? Lane said overall there’s “almost nothing” local government can do to affect that kind of market, but a few policy options to temper the impacts the surge is having on renters may be available. One is further efforts to increase the citywide minimum wage so that working-class people can afford the higher rents, and another would be more effective enforcement of the city’s current Airbnb regulations.
“Air BnBs, though we’ve been doing some things to try and control those, I don’t think we have done a very good job yet,” said Lane.
