When it comes to real estate, home buyers, owners, and sellers seem to have hogged all of the headlines. The past decade has been all about recovering from the housing bust and then watching home prices reach the stratosphere. But the oft-overlooked renters have had their own shifts and struggles.
In the past 10 years, rent prices have surged, renters are getting older and wealthier, and more tenants are choosing to lease housing in the suburbs instead of the big cities, according to a recent report from apartment listings site RENTCafé.
The report was based on apartment data from Yardi Matrix and PropertyShark, which are part of the same corporate family as RENTCafé. It also incorporates data from the U.S. Census Bureau and U.S. News and World Report. Single-family rental homes were not included in the report, only apartments.
“Apartment housing has grown significantly,” says Doug Ressler, manager of business intelligence at Yardi Matrix. Plus, he adds, “the costs to rent have continued to escalate. The housing demand is high, and the supply is not keeping pace with that.”
The number of renters is growing, despite higher prices
At 108.5 million strong, renters now make up just over a third, 34%, of the population. That’s up from 99.4 million at the start of the decade. And their numbers are increasing twice as fast as that of homeowners.
About a third of the nation’s 260 largest cities have more renters than homeowners. Topping the list of renter havens is New York City’s Manhattan, where at least 77% of residents are renters. (The boroughs of New York City were broken out separately; the others were more owner-friendly than Manhattan.) Nationally, Northeastern cities have the highest concentration of tenants.
What’s remarkable is their numbers are surging despite price hikes. Since 2010, rental prices surged 36%, to reach an average of $1,473 a month on the national level. That’s a $390 increase.
But that’s likely because they’re also priced out of the for-sale housing market. It’s hard to save up for a down payment and pay rent. Plus, they may have less than ideal credit scores or carry too much debt.
Or they may simply prefer leasing a home where they’re not responsible for maintenance, can live in an area where they couldn’t afford to buy, and don’t want to be tied down with a 30-year mortgage.
Those reasons are likely responsible for why the number of renters went up twice as fast as the number of homeowners over the same period.
You’ll never guess who’s renting today
Forget the tired stereotype that renters are all 20-somethings who want to be able to walk to the neighborhood bar and don’t make enough money to buy a home. It’s simply not true.
While many of today’s renters struggle to come up with their monthly rent, some are getting wealthier. The percentage of renter households pulling in $150,000 and up shot up 157% over the past decade!
And renters are also getting older. The percentage of tenants aged 60 and up grew 32% over the past decade.
“They don’t want the continued expense on a fixed income of owning a home,” says Ressler. Many also want to live closer to top-notch medical facilities.
Apartment dwellers aren’t just confined to the big cities either. Suburbs added a larger percentage of renters, 17%, compared with the cities, 14%, since 2010. In 40 of the largest 50 metropolitan areas, the renter population surged more in the burbs than the big cities.
That’s because many renters want larger apartments, better school systems, and cheaper housing.
“Where people want to live is changing,” says Ressler. “What we really see is suburbs that are walkable are [popular]. They want to be located next to transit hubs.”
How apartments are changing with the times
Unlike with single-family homes, builders are putting up plenty of rental buildings. That’s great news during a national housing shortage. About 2.4 million units were created this decade—the most since the 1980s. Sound too good to be true?
The downside is apartments are also getting smaller, by about 57 feet, roughly the size of a bathroom. They fell from 990 square feet to 933.
In addition, 40% of these units were classified as luxury. They come with all sorts of resort-style amenities such as 24/7 concierge service, pet washing stations, and rooftop gardens. While that’s great news for residents, it means these apartments are likely well out of the price range of the masses.