Marquette University’s Chair in Real Estate, Dr. Mark Eppli, once posed to WHR Group a hypothesis that—based on the strong emphasis on sustainability and the powerful fear created in the millennial generation while watching their parents struggle through the most recent financial crisis—the American Dream of owning a home in the suburbs is changing.
Rising Stats on Rent
The reality today is that the number of renters has significantly increased in major metros across the country, and research shows an increase in renting at almost all age groups. As Dr. Eppli alluded, some of this shift can be traced back to millennials who are cautious about putting down roots and are already strapped with debt from student loans.
But it’s not just millennials. According to a recent Harvard study, America’s Rental Housing: Expanding options for diverse and growing demand, Baby Boomers have also been inflating the demand for rental housing: either through the real estate crash that forced them to build back their credit score, or for those looking to downsize into retirement. “While households in their 20s make up the single largest share [of renters], households aged 40 and over now account for a majority of all renters.” (Harvard study)
“The decade-long surge in rental demand is unprecedented. In mid-2015, 43 million families and individuals lived in rental housing, up nearly 9 million from 2005 — the largest gain in any 10-year period on record.”
-America’s Rental Housing Study, 2015
Today’s Renter Profile
As the trend to rent has continued upward, it has put substantial pressure on the rental market and costs. The National Association of Realtors found that, while rent has risen 15 percent over a five-year period, renters’ income grew only by 11 percent. The accelerating prices require more of a worker’s salary than in the past for the same rental units. This gap also makes it nearly impossible for renters to save for a down payment to transition into a homeowner.
Interestingly, one factor that does not seem to impact homeownership is having children. Harvard’s America’s Rental Housing study shows families with children are renting just as much as individuals.
Managing the Rental Demand in Relocation
Researchers are hoping relief for high rental demand can come from supply of new construction of both multi-unit rental properties as well as single-family rental homes. The response thus far has been slow, as many builders were put out of business during the market slowdown. Luckily, more research from the National Association of Realtors found that builder confidence is up.
The best ways for employers to support their employees in this growing renter population is to realize that their profile is changing. Many will need more than a U-Haul to move their items during a relocation. Since some employees will be renting single-family homes, the lease cancellation fees can be higher, and the need for rental assistance in specific school districts is becoming more common. Employers would be wise to review the renter support they currently offer to ensure it matches the needs of the people and families they are moving.
For additional information on the changing rental market, check out the full Harvard study here: America’s Rental Housing: Expanding options for diverse and growing demand.
