A New Generation of Thought on Apartment Life
A fairly typical pattern for American households for decades has been much the same as my own experience. I grew up in an apartment (in New York City) and lived in apartments throughout college, graduate school, and my first few years in the workforce; my wife and I purchased our first house shortly before we had our first child. However, subtle signs indicate that a new pattern may be emerging. Demographic data suggest that younger households are renting in greater numbers than in the recent past, and some may be delaying their first home purchases. Some homeowners – especially empty nesters and singles – are returning to renting, too. This may be a transitory reaction to the housing crises – or something more fundamental may be shifting in the housing landscape.
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.
One reason is economics. The financial crises left many homeowners unable to afford their homes anymore. Plus, tighter credit conditions and heavier debt burdens have prevented many households or recent college graduates from buying single-family homes.
But it goes deeper than that. Renting has become as much – perhaps more – a lifestyle choice for many people as an economic one. Several interrelated trends seem to be driving the shift.
Less Emphasis on Owning … Anything
Echo Boomers (born 1981-2000) want to have certain experiences, but don't necessarily want to own the related products. Echo Boomers also tend to look for ways to minimize their environmental impacts. Because of technological and business innovations, they can do that. Cloud computing, Zipcar®, bicycle-rental and ride-sharing companies, the FreeCycle NetworkTM exchange – they're all part of this trend.
Many Echo Boomers view housing similarly. A 2013 Pew Research Center study of 18- to 35-year-olds showed that, in 2011, 1.5 million young-adult homeowners became renters, whereas just 871,000 renters bought homes.
They're not alone. A growing number of Baby Boomers in particular (born 1946-1964) no longer want the responsibilities of homeownership. In its 2013 report, The State of the Nation's Housing, the Joint Center for Housing Studies of Harvard University stated that renters, on average, are younger than homeowners, but net renter growth from 2002-2012 was strongest among 55- to 66-year-olds, increasing 80 percent. The number of 45- to 54-year-olds also rose dramatically.
Technology and a desire for "greener" living also have fueled a movement to urban cores (cities and inner suburbs) and generated a new vibrancy there. We see this most clearly in information technology and commercial centers. Think the areas in and around Austin, Denver, D.C., Portland, and Seattle, in addition to the old stalwarts of Boston, Chicago, Los Angeles, and New York City. These areas have fast-growing populations plus an ethos and economics that strongly support renting.
According to urban studies expert and theorist Richard Florida: "Walkable metros had higher levels of highly educated people, higher wages, higher housing values, more high-tech companies, greater levels of innovation, and more artistic creatives."i The Urban Land Institute's (ULI's) 2011 report, What's Next? Real Estate in the New Economy, confirmed it: "Metropolitan areas in the United States represent over 80 percent of the gross domestic product (GDP) of the country … Nearly 100 percent of robust population growth is located in urban areas. Metropolitan growth is embracing a new mixture of land uses, new suburban centers, and in-town reconfigurations." And ULI's 2013 report, America in 2013, cited more than half of respondents preferring to live close to shops and public transportation; more than 60 percent prefer a shorter commute, even if it means living in a smaller home.
Evolving Design and Purpose of Apartment Properties
Astute apartment owner/operators have spotted the urbanization trend and not only catered to it, but aided its evolution. There's a vibrancy around these centers, which offer an attractive lifestyle alternative even for households who might otherwise lean toward homeownership. The mantra for the communities being developed today is "live, work, play," and they are designed not only to satisfy existing renters, but also to convert prospective homeowners into "renters by choice" with the features offered. Among them:
- Social centers and planned activities, fitness centers, media rooms, pools, pet day care, bicycle maintenance facilities, grocery stores, and more – all near parks, entertainment, and public transportation. The list of amenities can read like a resort brochure.
- The living space might be smaller, but residents have access to many more amenities than they likely would in a single-family home – without having to mow a lawn or fix a roof.
- Today's apartment communities also support the growing number of people who work from home, offering wireless connectivity and, in some cases, on-site business centers, where teleworkers can be among peers.
- Although many of these communities attract higher-income households, the trend extends to moderate- and lower-income communities. Some of these also offer enrichment programs for resident children and their parents.
If these new apartment communities make renting attractive enough that the median age of first-time homebuyers rises by just one or two years, it will take a few million households from the ownership ranks to renting. That could move the needle on homeownership rates and affect the composition of housing demand for years to come.
Certainly, homeownership has many virtues, and probably always will be the ultimate American Dream. And the more spread out suburban and rural settings will always have appeal. But a significant percentage of households – especially young adults and seniors – likely will choose to rent long-term, or at least delay first-time home purchases awhile.
i The Atlantic Cities, "Why Walkable Cities Aren't Always the Ones You'd Think", Richard Florida, October 13, 2011.
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