More people are renting their homes, and it's not only young singles just starting out, the Joint Center for Housing Studies of Harvard University (JCHS) reported in its annual housing study. The number of U.S. households who rent their homes rose in 2014 – for the 10th year in a row. In fact, 2004 to 2014 saw the strongest renter growth of any 10-year span since the 1980s. At the current pace, the 2010s could become the strongest decade for renter growth, period.
We've all heard about Millennials' (born 1985-2004) preference to rent. But did you know that, from 2004-2014, households aged 45-64 contributed twice the share of renter growth than those younger than 35 years old? Or that households aged 55 or older drove 42% of renter growth during those 10 years, despite making up only 25% of all renters? These increases stem partly from the Great Recession and partly from a growing preference or need among Generation Xers (born 1965-1984) and Baby Boomers (born 1946-1964) as they've aged, among other reasons.
As you might have guessed, the number of couples and families who rent has risen since 2004, too.
And renters' income distribution has moved higher, after falling in 1994-2004. From 2004-2014, about 20% of net new renter households had incomes in the top 25%; looking at 2011-2014 alone, top earners accounted for almost one-third of new renter households.
Single-family homes made up a growing number of rentals – the recession had a lot to do with it. But more than this, construction of multifamily properties (containing five or more apartments) has been on a tear lately.
Despite all of the additional rental housing coming onto the market, supply remains tight in most markets; vacancy rates are at a 20-year low, especially for units considered affordable. And in turn, rents keep rising – about double the rate of inflation in 2014. More than half of renters – a new high of 20.8 million households in 2013 – spend more than 30% of their income on rent and utilities and, therefore, are considered cost-burdened; a quarter of renters spend more than 50%.
Over the next 10 years, renter growth is expected to remain robust. (A sign: The U.S. Census Bureau’s June 2015 survey showed the lowest level of homeownership in 48 years.) Millennials could form 20 million households between now and 2025, with most at least starting out as renters. The percentage of renter Gen Xers and, even more so, Baby Boomers will keep rising, too.
For details and lots of other insights, read the JCHS report, The State of the Nation's Housing 2015.
Read another posting on JCHS report findings: "Harvard Study Reveals the Changing Face of American Households"
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