Minimal Fluctuation in Renter Satisfaction
Following the trend of the past two years, minimal change occurred in national resident satisfaction at the end of 2016. In the fourth quarter, 76.7% of apartment renters rated their overall satisfaction as "good" or "excellent" for the 12‐month period ending Dec. 31, 2016, just 0.1% below Q3 and equivalent to the satisfaction rate measured at the end of 2015, according to Kingsley Associates' latest survey. When segmented by market, the majority of the largest markets encountered only slight variations in resident satisfaction over the past year. However, in New York, resident satisfaction diminished by 3.5% over the past 12 months.
Renewal Intent on Rise; D.C. Experiences Largest Upswing
For the second consecutive quarter, renewal intent among renters surged upward after having declined for the past two and a half years. The percentage of residents who indicated they would likely renew their current lease climbed to 53.0% in Q4, up 0.7% from Q3 and 1.6% over the past six months. While many large markets did not see significant adjustments in renewal intent, notable differences occurred in Washington, D.C., and New York throughout the year. Renewal intent soared 7.3% in Washington, D.C., to an unprecedented 61.7% market average, well above the national average. In contrast, renewal intent dwindled by 4.2% in New York to meet the national average of 53.0%.
With both markets expecting similar supply growth of approximately 16,000 new units in 2017, the cause of the renewal intent disparity between the two markets comes into question. In D.C., 58.5% of residents said they are satisfied with the value they receive relative to the amount they pay for their apartment, which represents a 4.7% increase over the past year. In contrast, only 50.9% of New York renters are satisfied with respect to value for amount paid, which is a 3.1% drop over the same period. This 7.8% differential between the two markets may factor into why residents in Washington are more likely to renew their leases. In addition, while both markets will deliver the same amount of units in 2017, the positive job growth projected in Washington should create enough additional demand to limit the surplus of apartments.
Rental Rate and Location Remain Top Renewal Decision Factors
In line with last year’s ratings, rental rate and location top the list as the most important renewal decision factors, with 54.6% of residents indicating rental rate was a renewal decision factor, and 54.2% noting that their location factored into the renewal decision. Behind the clear front runners, community management placed third on the list, at 38.0%.
When taking into consideration residents’ declared renewal intent, the results veer slightly from the collective data. Residents likely to renew place significant emphasis on location, with 73.9% of residents considering it a renewal decision factor, while 65.2% of residents who are unsure of their renewal decision cite rental rate as a factor, with location not influencing the decision as heavily. Similarly, residents unlikely to renew indicate that rental rate is the top determining factor, while location ranks fifth on the list.
Some Renters Looking to Buy
Among those residents who anticipate a change in their living situation in the next 12 months, 19.1% said they will move to a similar apartment. However, over the past two years, the percentage of residents expecting to purchase a home increased by 1.9%, bringing the total number of renters in Q4 who anticipated becoming homeowners in the next 12 months to 15.9%. When it comes to their expected living situations in the next five years, one‐third of residents reported that they see themselves renting, while two‐thirds envision themselves buying.
On a market level, the results indicate a slightly different trend. While desire to purchase a home remains high nationwide, the percentage of residents who picture owning homes has decreased over the past year in most major markets. Most notably, in Washington, D.C., 64.7% of residents foresee themselves buying a home in five years, down 9.3% from one year ago.
While many factors determine a resident’s decision to rent or own, 68.3% of residents in Q4 deemed location the most influential factor. Residents who wish to own a home prioritize location, cash available for a down payment, and space needs in the decision-making process. Conversely, residents who want to remain renters primarily base their decision on location, amenities, and services. While community management may not be able to control the location of the community, they can certainly influence the amenities and service offerings available to these residents and, in turn, make them more likely to stay.
