Rents may be rising and new apartments may be coming on the market each year, but more than half of U.S. apartment renters with expiring leases in October chose to renew rather than find somewhere else to live, according to MPF Research.
Of all expiring leases in October, 52.2% were renewed, according to an MPF Research analysis of lease transaction data from Carrollton, Texas–based parent company RealPage. That rate was up 0.2 percentage points from October 2014, continuing a 29-month trend of year-over-year increases in retention rates. These figures exclude designated low-income housing.
Renewal rates typically hovered in the mid to upper 40% range prior to 2010, but those numbers have exceeded the 50% plateau for each of the past 22 months.
There was also a 5.2% average increase in monthly rent among the leases renewed in October, the largest jump in nearly 10 years. Over the past 22 months, the average rent increase for a lease renewal was 4.7%.
“For all the noise about affordability, there isn’t yet any real evidence that market-rate apartment renters are unable or unwilling to renew their leases,” said Jay Parsons, director of analytics for MPF, in a release.
MPF also looked at apartment affordability and found that the average household in a conventional apartment unit spends around 20% of their income on rent, but very few low-income households live in conventional apartments.
Low-income families also don’t have many options for where they can live. According to the Joint Center for Housing Studies of Harvard University’s 2015 State of the Nation's Housing report, for every 100 very low–income renters in the U.S., there are only 58 affordable units available.
While U.S. apartment construction is at a three-decade high, most of the new units are of the luxury, high-rent variety. That means that even for the bulk of households in market-rate apartments, it’s much cheaper to pay a 5.2% renewal rent hike than to move into a newly built property.
“The problem isn’t rent growth in market-rate apartments,” Parsons said in the release. “The problem is the lack of income-restricted rental units for households that couldn’t afford a market-rate apartment even prior to the recent run-up in rents.”
The Northeast and Midwest tended to see higher retention rates than the South and West, but every region logged retention rates above 50% in October, according to MPF. There was higher turnover in the South and West regions, which can be attributed to the fact that they’re generally “younger markets with stronger job growth of late,” Parsons said in the release. “And younger population plus more job growth tends to equal more mobility, which in turn means higher turnover or lower retention.”
San Francisco posted the highest renewal rent growth for the year ending in October, with a 9.2% increase, followed by Oakland, Calif., at 8.5%, and Seattle, at 8.3%, according to MPF data.
Milwaukee had the highest retention rate for the year
ending in October, with 65.3% of its residents choosing to stay in their apartments, while
San Antonio posted the lowest rate, at 43.8%.