Last year alone, Americans spent a staggering $485 billion on rent, a record high.
Factors such as the youngest generation of renters carrying heavy student debt and increased construction can be pointed to as obvious markers for the sharp increase, but the growing rent purse also suggests that a shift in the renter demo is currently taking place.
In this week’s Mobile Doorman Blog feature, we discuss the evolving American rental demographic to inform how apartment communities across the country can prepare themselves for the continued uptick in numbers over the next decade.
The Rise of the Renter
As we mentioned earlier, more Americans are flocking to rentals than we’ve seen in decades. With the housing crisis still in the not-so-distant rearview mirrors of millions of Americans, more U.S. households are headed by renters than at any point since 1965, according to a Pew Research Center analysis of Census Bureau housing data.
While recent trend pieces point to historical data suggesting an upcoming stagnation in the apartment market, with nearly 39 million Americans (1 out of every 8) calling apartments home, it’s becoming increasingly difficult to refute the demand for apartments.
A Stagnant Income
While more Americans are flocking to rentals than ever before, the median income of an apartment household has fallen by $3,000 since 1985.
Couple this with an overall stagnation in income for many households, and you have a mixture worth keeping an eye on. After adjusting for inflation, wages are just 10% higher in 2017 than they were in 1973, amounting to real annual wage growth of just below 0.2% a year. "The U.S. economy has experienced long-term real wage stagnation and a persistent lack of economic progress for many workers," warns Jay Shambaugh, a White House economist under President Barack Obama.
With this in mind, as well as the record high spending of this same demographic, America’s affordable rental housing shortage is becoming more than just a housing problem.
A True Melting Pot
By 2024, immigration will surpass internal population growth for the first time, according to Hoyt Advisory Services research. Immigrant families are more likely to rent than native-born Americans, and their household sizes tend to include four or more people.
Additionally, according to HAS research, Hispanic housefolds alone will account for more than half of all U.S. population growth through the next decade. Couple that with HAS studies that immigrants are more likely to rent, and rent longer, and you can easily see an evolving trend in the majority demographic for rentals in the near future.
A Diverse Age Group
As we’ve discussed thusfar, the U.S. population is getting older and more diverse. Because of this, many warn that the apartment industry should be studying the expanding bubble of aging Americans - 65% will be 35 or older in 2030 - instead of strictly millennials.
In fact, over half of the net increase in renter households from 2006 to 2016 came from boomer households. Not a stat that should be ignored, right?
That said, encompassing 75 million people, the young adult age bracket of 18-34 year olds have now become the largest demographic in the US. And on top of this, trends suggest that more young adults are renting than previous generations. Moreover the growing concerns of student debt of the current young adult generation only further point to the attraction of the short-term financials of a rental situation.
Conflicting, right? The main takeaway for apartment communities should be that the silver bullet method for one type of renter no longer works, and that the multifamily industry should be ready to cater to this diverse - and growing - group.