As housing inventory continues to tighten, would-be homeowners are being driven toward renting—and the apartment market is struggling to keep up. According to a new study commissioned by the National Multifamily Housing Council and the National Apartment Association, the U.S. will need 4.6 million new apartments by 2030 in order to keep up with demand—or 325,000 every year.
According to the study, about 1 million new renter households were formed every year over the last five years. This steep jump is caused, in large part, by consumers delaying housing purchases.
“Life events such as marriage and children are the biggest drivers of home ownership,” Rental Housing Journal reported. “In 1960, 44 percent of all households in the U.S. were married couples with children. Today, it’s less than one in five (19 percent), and this trend is expected to continue.”
Consumers aging or immigrating from other countries also play a role in the growing trend to rent over buy, according to Dr. Norm Miller, Principle at Hoyt Advisory Services and Hahn Chair of Real Estate Finance at the University of San Diego.
“We’re experiencing fundamental shifts in our housing dynamics, as more people are moving away from buying houses and choosing apartments instead,” Miller said. “More than 75 million people between 18 and 34 years old are entering the housing market, primarily as renters.”
But it’s not just millennials eschewing buying, Miller said. Older generations are leaning toward rentals, too.
“Increasingly, Baby Boomers and other empty nesters are trading single-family houses for the convenience of rental apartments,” Miller said. “In fact, more than half of the net increase in renter households over the past decade came from the 45-plus demographic.”
According to the study, the Western U.S., as well as large states like Texas and Florida, will be where new rental units are needed most over the next few decades. It’s no surprise either; a Home Value Forecast recently released by Pro Teck Valuation Services showed housing inventory lowest in Washington, New Mexico, Texas, Florida, and other southern states. Seattle had the lowest inventory of all U.S. metros.
“Seattle has a dire need for more single-family, moderately-priced homes,” the report stated, “as supply has not kept up with demand, leading to limited inventory and increasing prices. While more multi-family homes are being built, single-family home starts are still at a fraction of pre-crash levels.”