CPI rent regional trends and the impact of the COVID-19 pandemic

The COVID-19 pandemic led to significant increases in the cost of shelter. These increases were a major contributor to the national level of consumer inflation, with rent increases in 2022 accounting for nearly half of all consumer inflation, as measured by the Consumer Price Index (CPI).¹ However, the change in rental costs has been larger in some places than in others.

This article discusses movements in rents among the four U.S. census regions (West, Northeast, South, Midwest), from 2013 to 2023, with specific focus on how the COVID-19 pandemic affected previous regional trends.

Construction of the regional price data

The U.S. Bureau of Labor Statistics (BLS) constructs the rent of primary residence (rent) index using data from the BLS Consumer Expenditure (CE) Surveys, the BLS CPI Housing Survey, the U.S. Census Bureau’s American Community Survey (ACS), and the U.S. Department of Energy’s Residential Energy Consumption Survey (RECS). The CE Survey asks households for their total spending on different categories of goods and services; survey responses are subsequently used by BLS to create spending weights for the indexes. The RECS is used to make monthly quality adjustments for parameters such as the type of structure, age of structure, and number of rooms. The Housing Survey collects data on the rents of housing units across the United States.²

The CPI geographic sample is selected to be representative of the urban population of the United States. BLS selects 75 metropolitan areas across the nation in which to conduct CPI and CE surveys.³ Using data from the Decennial Census of Population and Housing, BLS selects representative neighborhoods within each of the select metropolitan areas for housing unit sampling.⁴ The weight of each neighborhood is based upon the latest 5-year ACS data. BLS data collectors contact a sample of renter-occupied housing units selected to represent each segment in the CPI Housing Survey, collecting rent data from each sampled housing unit every 6 months. Using the sample of rental units, BLS calculates a measure of price change for each CPI index area for the rent index.⁵

The CPI is computed for several geographic areas that are either large metropolitan areas or groups of smaller metropolitan areas in the same region. Large metropolitan areas, or areas in a region with more than 2.5 million people, are self-representing and CPI data are published for those specific areas. Smaller metropolitan areas, or areas in a region with fewer than 2.5 million people, are grouped together to form a nonself-representing size class for each region and CPI data are published for that size class in its relative region.⁶

The U.S. all items index, U.S. rent index, and U.S. all items less shelter index all rose steadily from January 2013 to January 2023. (See chart 1.) The U.S. all items index rose nearly 30 percent, averaging a 2.65-percent rise annually, while the U.S. rent index rose over 45 percent, averaging a 3.91-percent rise annually. The all items less shelter index rose more slowly than the all items index, with an average annual increase of 2.20 percent throughout the 10-year period. All three indexes had higher average annual increases from 2018 to 2023 than they did from 2013 to 2018. (See table 1.) This acceleration is similarly reflected during the time in which the COVID-19 pandemic was particularly strong, from March 2020 to January 2023, when all three indexes had higher average annual advances compared to any other 3-year period from 2013 to 2023. These findings indicate the pandemic’s impact on consumer inflation and how increasing rental costs have continued to drive rising price changes in the U.S. all items index.

How did the COVID-19 pandemic impact rent in each region?

To understand how rates of rent inflation have changed since the onset of the COVID-19 pandemic, changes in rental prices can be examined by region to determine where regional trends have shifted. Rent inflation rates nationally and in the Northeast, Midwest, and South trended together from the start of 2013 until the effects of the COVID-19 pandemic began in the United States in March 2020.⁷ From the end of 2013 until the beginning of the pandemic, rent changes in the West trended higher than the other U.S. regions and the national average, increasing threefold. However, at the onset of the pandemic, all four regions experienced disinflation in their housing rental prices, with the rate of rent inflation temporarily slowing down. Changes in rental inflation from March 2020 to January 2023 have revealed new trends among the regions that differ from those present prior to the beginning of the pandemic.

Excluding the period of disinflation at the beginning of the pandemic, changes in rent inflation in all four regions rose consistently from January 2013 to January 2023. (See chart 2.) Rent prices in the West saw the highest acceleration throughout the decade, averaging a 4.52-percent increase annually. Rent inflation was the slowest in the Northeast, averaging a 2.86-percent rise annually. (See table 2.) Changes in rent prices also rose in the South and in the Midwest from 2013 to 2023, with an average annual increase of 4.24 percent and 3.35 percent, respectively. All four regions had higher average annual increases in the 2018–23 period than they did in the 2013–18 period. The difference between the two 5-year periods was most prevalent in the South and least prevalent in the West, where average annual price changes increased 1.54 percent and 0.03 percent, respectively. All four regions experienced higher average annual increases in rental prices from March 2020 to January 2023, during the COVID-19 pandemic, compared with any other interval within the 10-year period. These findings show the pandemic’s broad impact on regional rent prices and how that impact has varied among the four regions.

The West

Changes in rent prices in the West for most of the 2013–23 period were higher in comparison with the other three regions, as well as the United States as a whole. (See chart 2.) However, as the effects of the COVID-19 pandemic began to take hold in the latter half of 2020, Western rent price changes began to slow to a lower rate than in the South, the Midwest, and across the nation. Even as rent price changes in all regions accelerated upward beginning in mid-2021, rent prices in the West never took back their position as the region with the highest rate of inflation. Instead, the rate of rent increases in the West was more similar to the national average than they had been in the prior 5-year period.

From October 2020 to January 2023, the three self-representing Western metropolitan areas that contributed the most to the region’s rent inflation were Los Angeles–Long Beach–Anaheim, CA; Phoenix–Mesa–Scottsdale, AZ; and Seattle–Tacoma–Bellevue, WA, which represented nearly 30 percent of the region’s change in rental prices.⁸ (See table 3.) The contribution of an index area to its regional rental price movement is a function of its spending weight share and price change over time. For example, the increase in rents in the Los Angeles–Long Beach–Anaheim area contributed 11.78 percent of the overall rent increase in the West from October 2020 to January 2023. In other words, the Los Angeles–Long Beach–Anaheim area alone accounted for 1.47 percentage points of the overall 12.50-percent increase in rents. The ratio of the difference in the change in weight for each Western metropolitan area to the change in weight of Western rents overall indicates the contribution.

The Northeast

For a majority of the 2013–23 period, changes in rental prices in the Northeast trended near those of the Midwest and were lower in comparison with the U.S. average, the West, and the South. (See chart 2.) However, the COVID-19 pandemic also impacted rent inflation in the Northeast. By August 2020, changes in rental prices in the Northeast were lower than in any other region and in the United States overall. Even as rents were subject to disinflation in every region at the beginning of the pandemic, rent changes in the Northeast continued to be the lowest among the other regions and the national average. This trend continued into the beginning of 2023. Although lower rental inflation in the Northeast relative to other regions and the national average did occur prior to the beginning of the COVID-19 pandemic, once the pandemic began, increases in Northeastern rents were and remained markedly lower than that of any other region.

From August 2020 to March 2022, the self-representing metropolitan area that contributed the most to rental increases in the Northeast was Philadelphia–Camden–Wilmington, PA–NJ–DE–MD, representing over 15 percent of the region’s rent inflation. (See table 4.) For example, the increase in rents in the Philadelphia–Camden–Wilmington area contributed 15.79 percent of the overall rent increase in the Northeast from August 2020 to March 2022, accounting for 0.48 percentage points of the overall 3.04-percent increase in rents. The ratio of the difference in the change in weight for each Northeastern metropolitan area to the change in weight of Northeastern rents overall indicates the contribution.

The South

Changes in rent prices in the South for the past decade have trended consistently with those in the Midwest, as well as nationally. (See chart 2.) However, the COVID-19 pandemic also influenced changes in rents in the South. Halfway through 2020, Southern rent price increases exceeded the national average, and by the end of 2021, the South became the region with the highest rate of rent inflation. This trend continued into the beginning of 2023. Although advances in the rate of rental prices in all regions increased markedly since the COVID-19 pandemic began, rent inflation in the South outpaced all other regions, reaching record high rates for the 10-year period.

From November 2021 to January 2023, the three self-representing metropolitan areas that contributed the most to rental increases in the South were Miami–Ft. Lauderdale–West Palm Beach, FL; Dallas–Fort Worth–Arlington, TX; and Atlanta–Sandy Springs–Roswell, GA, representing over 20 percent of the region’s rent inflation. (See table 5.) For example, the increase in rents in the Miami–Ft. Lauderdale–West Palm Beach, FL area contributed 9.22 percent of the overall rent increase in the South from November 2021 to January 2023 and so accounted for 1.17 percentage points of the overall 12.68-percent increase in rents. The ratio of the difference in the change in weight for each Southern metropolitan area to the change in weight of Southern rents overall indicates the contribution.

The Midwest

Changes in rental prices in the Midwest from 2013 to 2023 trended with those in the South and in the Northeast and remained consistently below the national average. (See chart 2.) In June 2020, Midwestern rental price increases trended higher than the national average for the first time in the 2013–23 decade; this trend continued through March 2022. Furthermore, from March 2021 to October 2021, rent inflation in the Midwest was higher than the national average and all other regions.

From June 2020 to March 2022, the two self-representing metropolitan areas that contributed the most to rental increases in the Midwest were Detroit–Warren–Dearborn, MI, and Chicago–Naperville–Elgin, IL–IN–WI, representing over a quarter of the region’s rent inflation. (See table 6.) For example, the increase in rents in the Detroit–Warren–Dearborn area contributed 15.34 percent of the overall rent increase in the Midwest from June 2020 to March 2022, accounting for 0.98 percentage points of the overall 6.41-percent increase in rents. The ratio of the difference in the change in weight for each Midwestern metropolitan area to the change in weight of Midwestern rents overall indicates the contribution.

Conclusion

Since the beginning of the COVID-19 pandemic, the change in rents across the nation has varied by geographic region. In the West, changes in rents mirrored the national average more closely than they had prior to 2020, when the region had some of the highest rates of rent inflation in the nation. Whereas in the Midwest, changes in rents reached new heights for the decade after the pandemic began, trending higher than other regions and the national average. Soon after the pandemic's onset, changes in rents in the South accelerated faster than in the other regions and continued to do so through the beginning of 2023. In the Northeast, rent changes were and remain markedly low compared with other regions, despite the impacts of the pandemic. Rents are a major contributor to the U.S. all items index, but changes in rents vary geographically, and so the effects of rent increases on the larger economy will also vary by region. These results provide insight into how rent inflation changed before and after the start of the COVID-19 pandemic, how the pandemic’s impact varied between each geographic region, and how increases in rents have driven inflation overall.