The last decade has seen an unprecedented demand for rental housing, driven largely by the bursting of the housing bubble and demographic shifts, according to a report from The Joint Center for Housing Studies of Harvard University released this week.
The percentage of U.S. households that rent rose from 31 percent in 2005 up to 37 percent by mid-2015, the highest level of renters in five decades. The 10-year period from 2005 to 2015 saw the number of renters nationwide increase by 9 million up to 43 million by mid-2015, the largest gain in renters for any 10-year period on record.
A large driver of the unprecedented increase in rental housing has been the bursting of the housing bubble in 2008. Nearly 8 million families have lost their homes to foreclosure since the homeownership rate peaked in 2004. Household incomes have returned to their mid-90s levels and mortgage credit access has become tighter.
“The sharp downturn in both the economy and housing market has renewed appreciation of the benefits that renting offers,” the report states, citing lower moving costs for renters tan for owners that enable them to more easily respond to changes in employment or the housing market; less financial risk to renters than to owners who have a significant share of wealth tied up in a single investment that is subject to dramatic swings in value; and renters want to be relieved of responsibility (and expense) for property maintenance that comes with owning.
The growing popularity in rental housing demand is also due to the aging of the millennial generation (defined in the report as born between 1985 and 2004) which has created a larger number of adults in their 20s—which has traditionally been the most common age for renting. Millennials are also delaying until a later age life events that typically precede first-time homeownership, such as marriage and having children. According to the report, the number of renters nationwide would be even higher on top of the 9 million increase over the last decade if the recession “had not kept many young adults living in their parents' homes.” One million of those 9 million renters gained in the last decade were under age 30. Generation X (born between 1965 and 2004) accounted for one-third, or 3 million, of that 9 million increase. The largest share, perhaps surprisingly, went to baby boomers (born between 1946 and 1965) at 4.3 million, accounting for almost half of the 9 million increase in renters over the last decade.
The growth not only reflects the aging of the baby boomer rental generation, but the decline in homeownership rates among that demographic, according to the report. While households in their 20s make up the largest share, the majority of all renters nationwide are age 40 or older.