A recent analysis reveals that small businesses in various states are failing to pay their rent, with rent arrears increasing by over 40 percent month-over-month.
The statistics, which were released on Tuesday by Boston-based company tracker Alignable, demonstrate the severe impact inflation is having on the average American.
More over half of the 4,789 randomly selected small business owners surveyed indicated that their rent is at least 10 percent higher than it was six months ago.
Seven months ago, the majority of respondents said that their rents had increased by at least 20 percent.
In addition, around 37 percent of small firms, or over half of all Americans employed in the private sector, were unable to pay rent in October, according to the report.
Multiple states, such as New York and California, are much over the already high national average, heightening worries.
As an explanation for this phenomena, the author of the report, Chuck Casto, noted that small business owners remain resolute, but their salaries are “essentially being eaten away by inflationary forces” as dismal economic data continues to shake financial markets.
One-third of firms are at risk of closing, according to Alignable, if sales does not ‘ramp up’ dramatically in the coming months, because customers are hesitant to spend due to fears of an imminent recession.
Respondents cited increased rents, the impact of more than a year of high inflation, steeper-than-usual gas prices, increases in supply chain costs, growing labor expenses and labor shortages, and decreased consumer spending as the causes of the shortfall in money.
The study also indicated that approximately 51 percent of the nearly 5,000 randomly selected firms in U.S. cities that were analyzed experienced a rent increase in October, while 59 percent reported that consumers are spending less this month than previous.
And with gas and food prices on the increase and inflation at its highest level in forty years, businesses have been unable to meet their sales goals, further straining the working class’ already strained finances.
The survey indicated that rent delinquency was at a six-month low in September, fuelled by confidence for the fourth quarter’s earning potential as several small business owners reported an increase in sales.
However, only one month later, nearly forty percent of small business owners were unable to pay their monthly rent in full and on time, up from thirty percent in September.
In comparison to other months over the past two and a half years, the survey discovered that a wide variety of industries are significantly above the national average of 37 percent.
Firms in the education sector led the pack, rising 13 percent from the previous month to an astounding 57 percent, the largest percentage ever recorded in this subsector of businesses.
The automotive industry and restaurants also experienced unprecedented levels of delinquency throughout the month of October.
In October, around 49 percent of restaurants were unable to pay their rent, up from 36 percent in September. Similarly, 49 percent of car dealership and repair shop owners were also unable to pay their rent.
Those business owners highlighted to Alignable that they continue to face supply chain difficulties, such as the rising cost of metals and electronics and a lack of inventories for the items and materials their clients require to repair their vehicles.
In addition, 37 percent of real estate agents admitted to the firm that they did not pay their rent this month, an increase of 27 percent from the previous month, indicating that the repercussions of a slowdown in home sales as higher mortgage rates chill the housing market have become painfully apparent.
Alignable discovered that the majority of small merchants failed to pay their October rent this month, with 43 percent claiming they did not.
This is an increase of 12 percent from the previous month and is close to the year’s highest rent delinquency rate of 44 percent, which was reported in July.
The rent delinquency rate for transportation-related businesses increased by 8 percent from September to October, reaching 46 percent.
Pollsters employed by companies such as Lyft, Uber, and other cab companies claimed decreased customer spending and higher-than-usual petrol prices as their reasons for not being paid.
Added operational expenses and personnel shortages faced by trucking companies caught up in the nation’s ongoing supply chain problems, which arise from bottlenecks experienced during the pandemic, also contributed to the high delinquency rate.
Massachusetts topped the list in October, with more than half of respondents indicating they were unable to pay their rent in full and on schedule.
With a rate of 51%, the state’s delinquency rate is the highest it has been all year, increasing 15% from September and 18% from August.
New Jersey followed closely behind with a record-breaking rent delinquency rate of 49 percent, up 22 percent from the previous month and significantly higher than any other month since December.
In October, 45 percent of New York’s small businesses were unable to pay their rent, an increase of 6 percent over the previous month.
California, however, tied its record for the biggest rent delinquency this year, with 44 percent of respondents not paying rent in October.
Pennsylvania also established a record for the month of 2022, with 44 percent of company owners unable to pay their rent.
This figure doubled the percentage of business owners who were unable to pay in September, which had been 22 percent.
In October, 39 percent of Florida’s small businesses were unable to pay their rent, an increase of 16 percentage points from September.
Additionally, Texas exceeded the national average, with 38 percent of respondents unable to pay their rent, a 14 percent increase from September.
Approximately one-third of businesses in all fifty states are at risk of closing if revenue does not improve in the next months, according to the report.
As a result, the Fed is poised to hike interest rates again on Wednesday to combat soaring inflation.
This conference occurs just two days before the highly anticipated employment report, which, according to experts, could indicate additional evidence of the dollar’s decline.
Prior to the release of end-of-year earnings reports, which, according to financial experts, will reveal the true, troubled status of the U.S. economy, this confluence of variables will certainly impact both small and large enterprises.
Yung-Yu Ma, chief investment strategist at BMO Wealth Management, said of the country’s current economic scenario, “Earnings season may not be disastrous, but it will be difficult to change this tide.”
Despite a cooling property market, rents throughout the nation continue to grow, with New York City remaining the most expensive place to live in the United States.
The analysis by real estate tracker Zumper found that rents in dozens of other cities have risen dramatically year-over-year following falling during the pandemic.
Unsurprisingly, the city with the highest median rent for a one-bedroom apartment was New York City, with a staggering $3,860.
Six of the top 10 cities are located in California, including innovation and startup hub San Francisco, neighboring San Jose, and recently ascendant Miami.
However, in a bit of a surprise, Boston leapfrogged San Francisco to take second place, with average rents increasing 5.9 percent this month alone to $3,050.
This is an increase of roughly $1,000, or 50 percent, from last year, when the average rent in the City on the Hill was $2,150, and an increase of $400 from July.
In close proximity was San Francisco, which dropped two positions from last year, when it held the unenviable distinction of being the most expensive city. The average rent in the city increased to $3,020 from $2,660 at same time last year.
In other locations, rents have increased by as much as 100 percent, as landlords who suffered a financial loss during the pandemic sought to recuperate their losses.
Recent rising mortgage rates, which make it too expensive for prospective homebuyers to purchase, are also contributing to the significant increase in demand for rentals, which are frequently controlled by opportunistic property managers.
President Joe Biden stated in a Thursday interview that the United States is not experiencing record inflation.
Having having lied about gas prices being lower than when he entered office, he was questioned about the 8.2 percent unemployment rate the United States is currently experiencing.
You have referred to the midterm election as a choice rather than a referendum, the reporter questioned. Why, in light of unprecedented inflation, should people select the Democrats?’
Biden responded, ‘Because it’s no longer record inflation, I’m lowering it. Observe what we inherited.
Despite a minor decline from a 40-year high of 9.1 percent in June, the current inflation rate of 8.2 percent is still greater than any time in the previous four decades.