USA Today reported Tuesday that apartment lease renewals hit an all-time high of nearly 54 per cent in 2016. This is up from 52.9 per cent last year and a more-conventional 45 per cent in the mid 2000s.
US Rental Rates
Millennials are faced with student debt and expensive home buying options, which drives them into metro areas where developers have started putting up luxury apartment buildings, according to USA Today Tuesday. Elsewhere, Real estate research firm CoStar released a report in August that found many luxury apartments across the nation are left vacant, growing from 3.4 per cent four years ago to 5.5 per cent last month.
Then there’s a reluctance to move once millennials settle into apartments. This reduces the number of available apartments in American cities, RealPage chief economist Greg Willett told USA Today, and rents rise as a result.
RENTAL UNIT BUILDING
An estimated 330,000 apartments will be built this year, a slight increase from the 230,000 built in 2015, USA Today reported. But with more developers building on expensive land, Willett said affordable apartment complexes won’t be profitable.” Meaning the high rents stay.
The US stands out in unfavourable ways, says Harvard Joint Center for Housing Studies senior research fellow Michael Carliner, to the Chicago Tribune September 2. Americans are in worse shape than people in any other country when it comes to being able to afford the apartments and houses they rent.
SURGE IN RENTAL DEMAND
The trend comes after an unprecedented surge in rental demand in the US. During the decade that began in 2005, renter households grew 9 million to 43 million households. The combination of 8 million homeowners losing homes to foreclosure and the resulting damage to credit scores kept millions from buying again and forced people into rentals. In addition, Harvard researchers have noted that falling incomes and changing tastes for homeownership after the pain and shock of the crash have contributed to the competition for apartments and rental homes. That surge in demand has sparked large price increases, and high rents have been especially brutal for people with low incomes.
RENTAL DEMOGRAPHIC
- The large majority of people renting in the US and in every country studied have incomes below average.
- About 12 per cent of renters in the US are in the top fifth of incomes. About 55 per cent are in the lowest fifth.
- The average household renting in the US has an in-come of US$46,916, while the average household owning a home has an US$85,017 income.
US HOME OWNERSHIP RATES
“According to census data, homeownership has dropped from 69.1 per cent of households in 2005 to 62.9 households recently, the lowest level since 1965. In most countries, the Harvard study found, the median income among renters was about half that of homeowners.”
HOUSE PRICES
Compared with their incomes, housing costs for renters in the US are the highest of any country studied. And the share of Americans with the most severe cost burdens is greater than the other countries. More than 28 per cent of renters in the US are devoting more than 50 per cent of their gross income to paying rent. That’s far in excess of the rule of thumb, to spend no more than 28 per cent on housing.
In another recent study, the John D. and Catherine T. MacArthur Foundation found that 48 per cent of renters in the Chicago area are spending more than 30 per cent of their income on housing. To make ends meet, some reported cutting back on healthy food and health care or settling for dangerous areas.