Rental housing has changed a lot in the last decade, and the start of a new decade gives us a chance see where we are today. These trends are crucial for landlords to know about. By putting them all together, it’s easier to see the big picture and whether any adjustments are needed.
Providing basic rental housing may not be enough to meet the demands of today’s renters. The success of any rental business depends on whether landlords are catering to the wants and whims of the tenants. I’d like to review a list of trends that have shaped the rental industry over the last ten years. It was put together by RentCafé with data from the U.S. Census bureau, Yardi Matrix, PropertyShark, and the U.S. News World Report.
The Rise of Rentership
The last decade began at a time when many U.S. consumers lost their homes to foreclosure. That turned a huge number of homeowners into renters and pushed demand higher for rentals, but not everyone switched to renting out of necessity. As RentCafé explains, “While the recession pushed many to rent out of necessity, the economic expansion which followed, coupled with changing attitudes towards family and homeownership, lead to the rise of the rent by choice.” Let’s break it all down…
1 – Demand Fuels Rent Growth
That growth in demand has fueled a big jump in rents. Since 2010, the national average rent went up 36% or about $390 a month. Among the factors that justify higher rents are higher real estate prices, more sophisticated rental housing amenities, and a thriving job market that makes the higher prices possible. The median household income rose 27% during the same time period, but wages didn’t keep up with home prices. Those rose 31%. The disparity between the growth of wages and home prices has pushed some into the rental market.
You might think New York or San Francisco topped the list for rent growth over the last decade, but no. Oakland, California, is number one followed by Denver; Seattle; Mesa, Arizona, which is near Phoenix; and San Jose, California. A few affordable markets for real estate investors that are on in the top 20 for rent growth are Atlanta and Jacksonville, Florida. The national average rent is currently $1,473 per month.
2 – Population Growth for Renters and Owners
The second trend we’ve seen is a growth in the number of renters. RentCafé says the renter population flew past 100 million to about 108 million renters since 2010. The decade began with about 99 million. The number of homeowners has also increased from 189 million in 2010 to about 202 million in 2018.
3 – Renter Growth Outpaced Owner Growth
There is an important detail to note about the growth of renters and owners — that renter growth was about double that of owner growth. The percentage of renters rose from 33% to 34% during the decade. That increase represents more than nine million new renters.
4 – Renters as New Majority in Big Cities
Twenty big cities shifted from an ownership majority to a renter majority during the decade. Of the 260 cities analyzed by RentCafe, there are now 82 cities with a majority of renters. The two states with the most number of cities making that transition were California and Texas. They each had three cities on the list.
5 – Most Majority Renter Cities In the Northeast
Most of the other cities with a majority of renters are along the Northeastern seaboard. Of the 20 cities with the highest percentage of renters in 2018, 12 were in the Northeast. The city with the highest share of renters is Manhattan, at 77%.
6 – More Highly Paid Renters
We’re seeing more and more renters with bigger paychecks. RentCafe found that the number of renter households earning more than $150,000 went up twice as fast as high-income owner households. Study authors say it’s a sign that more and more people are choosing to rent as a lifestyle option, than to become homeowners.
7 – Fewer Households with Children
The overall number of households with children has dropped significantly. RentCafe says they have decreased by 1.3 million since 2010. The decrease is more noticeable among owner households however. They are down 5.6% while renter households with children dropped just a half a percent. The statistics for families without children are more dramatic. Renter households without children increased 8.2%, and 20% for owner households.
8 – More Senior Renters
Renting has become more popular among seniors. The percent of seniors who rent went up 32% in ten years, while senior ownership increased by 23%. For the younger millennials, there’s a 3% increase in renting and a 5% decrease in ownership. The people between those generations show a 7% increase in renting and a 8% decrease in ownership. Seniors are defined as 60 years of age and older.
8 – More Renters in the Suburbs
The growth of the renter population has been the fastest in the suburbs. It grew at 17% compared to just 14% in the cities. RentCafe says the suburbs are attracting renters because they are less crowded with good schools and homes that are larger and less expensive.
9 – Apartments vs. Single-Family Rentals
The growth of renters in apartments outpaced the growth of households in single-family rentals by just 0.2%, but two-thirds of all renters live in apartments. RentCafe says the growth of single-family households was strongest right after the recession, while the multi-family sector has seen more consistent growth throughout the recovery.
10 – Out-Migration Highest in Priciest Cities
The most expensive cities have seen the biggest loss in residents. New York ranks first in that category with a loss of 216,000 people. Most of those people went to Philadelphia. The city with the highest in-migration was Phoenix. It gained about 42,000 residents, thanks in large part to former residents of Los Angeles.
11 – Millennials Abandon College Towns for Jobs
Millennials have been on the move. Ten years ago, they boosted population growth in the towns where they went to college. By 2018, they had left those towns for more lucrative job hubs. College Station, Texas, was the most popular college town for millennials in 2010. In 2018, the top city for working millennials was Cambridge, Massacusetts. The other cities on the list of millennial job hubs include: Washington, D.C. along with Arlington and Alexandria, Virginia. Seattle and Denver are also on the list along with San Francisco and Sunnyvale in Silicon Valley. One other city worth mentioning is Orlando. Millennials apparently like the job growth in that area. And, I’m sure they don’t mind the warmer weather.
12 – Apartment Construction Boom
Last but not least on RentCafe’s list of rental trends is the boom in apartment construction. It reports that builders have delivered almost 2-and-a-half million new apartments this last decade because of the high demand for rentals. The trend among this segment is for high-end facilities and resort-style amenities, since many Americans are now renting by choice. The city with the most new rentals is Dallas followed by New York, Houston, Washington, D.C., and Los Angeles.
The report lists 20 or more cities for most of these statistics.