Like home buyers, renters now are facing bidding wars in a fiercely competitive market

The licensed practical nurse couldn’t afford a $400 hike in her rent. So she started hunting for a new place.

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

“Within two weeks, I’d shown my client 44 houses and applied to 30-something,” Israel said. “And that is not an exaggeration.”

» READ MORE: Rents are expected to grow faster than home prices in 2022

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

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

In the recent competitive market, home buyers have often found themselves in bidding wars for limited supply. But demand for rentals is strong, too, and prospective tenants are now battling, especially those searching at the lower end of the market.

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

» READ MORE: Trying to buy a house in the Philly region’s hot market? Prepare for battle.

Israel has seen rental bidding wars at small-scale properties since the pandemic started, she said.

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

It’s gotten worse. Although rental bidding doesn’t appear to be a widespread issue, in the last year, about a dozen of Israel’s clients have been asked to bid for rentals.

Danielle Hale, chief economist at Realtor.com, said she was surprised when she started hearing last fall about bidding for rentals. But here and nationwide, the low supply of available rentals sets the scene for desperate acts.

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

“In a market that’s competitive, people are looking for any way they can to stand out and increase their chances of being the one to get the rental, just like we’re seeing in the for-sale market,” Hale said.

As rents continue to rise, struggling tenants, who generally have to put down a couple months’ rent at once, already are stretching their budgets looking for homes. They don’t have the money to offer higher monthly payments — if they can even find a place.

Renters who can’t find homes are taking rooms, sometimes in illegal rooming houses, said Rachel Garland, managing attorney of the housing unit at Community Legal Services of Philadelphia. Or they’re squeezing in with family, living in cars, and turning to emergency shelters. Some are paying for stays at Airbnbs and hotels, which is more expensive than renting.

» READ MORE: Low incomes make Philadelphia homes less affordable, Pew study find

“It’s almost impossible for our clients to move right now,” said Garland. The rental environment worsened during the pandemic, she added. “We’ve never seen it be this hard.”

The usual 60 to 90 days’ notice of a move “is not a realistic time frame for tenants to move anymore,” she said. Tenants with housing subsidies have an even harder time finding units in their price range. Renters with disabilities who need accessible units face extra challenges, too. Some clients at Community Legal Services have searched for six months.

Although rental property owners deny many clients because of poor credit or prior evictions, Garland said, “it doesn’t surprise me that tenants that are perfect from a landlord screening perspective are finding it difficult” to find a home also.

High home sales prices are keeping some renters from becoming homeowners. College graduates temporarily living with parents and tenants who put off moving earlier in the pandemic are resuming their plans. More renters are being evicted and looking for new places to live. More people are living alone.

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

“The rental market is very scary and particularly scary for people who have market-rate housing at the lower end of the spectrum,” said Rachel Falkove, executive director of the homelessness prevention and services nonprofit Family Promise of Philadelphia, formerly known as Philadelphia Interfaith Hospitality Network.

» READ MORE: What to look for before you sign a lease in Pennsylvania

Nationwide, the median rent reached $1,827 in April, up 21% from April 2020 and almost 17% from April 2021, according to a Realtor.com report. It’s on track to pass $2,000 by August. April marked the 14th straight month of record high median rents. In the Philadelphia metro, median rent is $1,775, up almost 8% from last year.

As inflation drives up prices for everything, roughly two-thirds of tenants say the biggest strain on their budgets is rising rent, according to a Realtor.com survey of more than 2,400 renters and landlords released this month.

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

» READ MORE: Tenants’ rights guide: Rent increases

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

As rents rise, some renters who have been in their homes for years and want to stay are getting priced out. Seniors and other tenants on fixed incomes are particularly vulnerable. Tenants seek help from organizations such as Family Promise when they can’t find new homes.

One woman who was formerly homeless moved her family out of their apartment of four years instead of renewing her lease because of mold and maintenance issues, Falkove said. She figured they’d live in a hotel for a week or two while she found another place.

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

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

June 2020 was the first time Israel of eXp Realty experienced a rental bidding war. After her aunt applied 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 a rental? No way,’” Israel said. Her aunt offered $200 more per month. But someone had already topped that.

A few weeks ago, Israel’s brother found a house in Delaware County with advertised rent of about $1,400. After he applied, 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 looked at apartments throughout the region earlier in the pandemic. A property owner who had listed a two-bedroom unit for about $1,400 told her a couple was willing to pay more. Wall offered an additional $50 a month, but the owner chose a tenant who could pay $100 more. That happened a few times.

“It doesn’t make sense. It’s not like a house that you’re buying,” she said. “Don’t get me there and say, ‘Someone else is bidding higher than you.’”

She got discouraged by the rental market and has decided to try to purchase her first home.

Wall, 62, who has adult children, has been living with family in a Maple Shade apartment while she continues to improve her credit and works with a financial adviser. She also has two daughters ages 5 and 6 whom 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 me a home,” she said. “So next year I want to be in my home.”

The Philadelphia-based Tenant Union Representative Network hasn’t heard that rental bidding is a widespread issue, but executive director Nicole Lawrence said she received a call about someone who got outbid for an apartment in Lansdowne.

“The sad reality” is that rents are increasing as neighborhoods gentrify and the cost of living goes up, Lawrence said. “I think the situation is going to get worse, not better.”

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

“We’re moving in the right direction but not very quickly,” she said. “There’s some light ahead, but it is still going to be a challenging market.”

The Philadelphia Inquirer is one of more than 20 news organizations producing Broke in Philly, a collaborative reporting project on solutions to poverty and the city’s push toward economic justice. See all of our reporting at brokeinphilly.org.