American renters paid a total of 4.9 percent more in rent last year compared to the year before, according to a recent analysis from Zillow.
Renters paid $441 billion in rent across the nation in 2014 compared to $420 billion in 2013. Although rents grew at a healthy pace in 2014, growth in the total number of renters nationally also contributed to the large overall sum, says Skylar Olsen, senior economist at Zillow.
The total number of renters grew about 1.9 percent in 2014. Olsen attributes the growth to the Millennial generation—including those who are graduating and moving into apartments and those who are finally able to move out of their parent’s homes. And today's renters are remaining renters for a longer period of time, " ... because Millennials are renting for longer and because there were so many foreclosed homeowners that became renters,” she says.
However, Olsen expects an even greater number of Millennials to form new households this year, leaving room for more growth.
“Household formation is still really low compared to a better time,” she says. “We have a lot of households still doubling up—32 percent of adults still live in a home where there is another adult who is not a married partner.”
The New York and Northern New Jersey metro area saw the largest increase in 2014 with $50 billion being paid in cumulative rent, up 3.6 percent compared to $48.2 billion in 2013.
Meanwhile, Los Angeles’ rent increased by 5.3 percent year-over-year with $34.2 billion paid in 2014 compared to $32.5 billion in 2013. Renters in Chicago, Dallas and Philadelphia also paid billions more in rent from 2013 to 2014.
When it comes to 2015, Olsen predicts similar increases this year, both in terms of the number of people renting and rent growth.