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Multifamily Viewpoints

Do Rising Rents Cause Renters to Buy Homes?

By David Brickman
Published on May 18, 2015

Are rising rents a symptom of increasing demand for rental housing or are they the harbinger of a coming change in housing choice? Are they going to be the cause for a future shift in housing choice back to greater homeownership or the effect of a shift to renting that is already well underway? This is a big question for us and the multifamily industry. To better get at the question, we decided to ask renters about it in our quarterly survey and found that the majority of them are not moving out in response to rising rents.

These results largely confirmed my own views. I believe rising rents are primarily a sign of increased demand rather than a signal that home purchases will be increasing. The demand for rental housing is increasing and an estimated 440,000 new apartment units are needed each year to keep up with demand. Add to that the facts that more than one-third of U.S. households now rent their homes, and renters account for all net new household growth over the last several years, according to the U.S. Census Bureau. This growth is occurring amid an improving job market and economy.

When we looked closely at the survey results, among the most interesting findings was that despite increases to their rent, approximately half of those surveyed state they are making no changes to their spending plans and nearly half say they like where they live and will stay in their current place.

We also looked at how satisfied renters are with their experience. About a third of renters are very satisfied with their rental experience and another 30 percent indicate they are moderately satisfied. Moreover, the results show some shared positive views across generations with no significant differences between Millennial, Generation X or Baby Boomer renters in their views that renting provides flexibility over where you live and protection against home price decline.

Want to know more? Click through our presentation that highlights the results.

David is executive vice president of the Multifamily business
Have a question or comment? Contact David

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