The jury has deliberated and the verdict is clear: The case for apartment living as a lifestyle choice has never been stronger. The shift is being fueled by a number of factors. Many cities are seeing a shortage of apartment stock, with the national supply estimated to be about 3 million units short of demand, according to the Harvard Joint Center for Housing Studies. The peak renter Gen Y demographic is expected to reach 76 million in the near future. And the homeownership rate has declined from 69.2 percent in Q4 2004 to 65.9 percent today, with every percentage point drop corresponding to an additional boost of 1 million renter households. While these data don’t capture consumer sentiment about renting versus buying a home, a recent study does. The National Apartment Association’s (NAA’s) annual Rent vs. Own Survey shows that consumers’ increasing tendency to rethink homeownership is playing out nationally as Americans deal with their personal economic situations today with an eye on their futures.
Renting Offers Freedom, Flexibility
Increasingly, people across all age groups and in urban, suburban, and even rural communities are becoming renters. Indeed, an online survey of more than 2,100 U.S. adults conducted in November by independent research firm Harris Interactive shows that 77 percent of consumers say they think there are advantages to renting versus owning a home given the current real estate market. That figure marks the third consecutive rise in rental confidence based on this survey, which also was conducted by New York City–based Harris in 2008 and 2010 and commissioned by the NAA. In 2008 and 2010, 71 percent and 76 percent of respondents, respectively, saw advantages to renting versus owning.
According to multifamily real estate research data and analysis by Los Angeles–based consulting firm CEL & Associates, demand for rental housing at midyear 2011 reached a multidecade high while the nation’s homeownership rate again sank to a multiyear low. Freedom from expensive maintenance and repairs, attractive amenities, and greater mobility to pursue job opportunities are among the many reasons renting is increasingly the best housing choice. The 2011 Harris survey, specifically, reflected an increase from the 2010 survey in the number of adults (64 percent) who cited the additional burden of major home repairs or maintenance as the primary benefit of renting a home versus owning. More than half (55 percent) mentioned financially specific benefits such as not being affected by an unpredictable real estate marketplace, not being susceptible to foreclosure, and not having to fear increases in their mortgage rates.
The survey’s overall findings mirror what our members are seeing throughout the country, especially in areas of the nation that are experiencing the first signs of economic recovery.
The simple fact remains that in a bad economy, people must make whatever changes necessary to improve their situation, especially if they’ve lost their jobs. Sometimes this might mean moving to another city where there is more opportunity, and if you’re tied to a mortgage, you don’t have the same ease of mobility as you do if you lease your home.
Learning From Past Mistakes
Today’s first-time renters, referred to as Millennials (ages 18 to 34), are making their housing decisions based on learning from mistakes made by their parents or friends. These residents acknowledge that renting an apartment is not just an alternative, but the right choice for them and their peers.
The Harris survey shows that, among all adults, 60 percent of renters plan to continue to rent the same residence or rent (not buy) a new residence within the next year, while only 14 percent plan to buy a home. Forty percent said they plan to rent for the next five years or more.
The choice to continue renting isn’t surprising when one considers the financial instability many homeowners feel in today’s economic climate. In fact, a resounding majority—94 percent—of the Harris survey respondents feel that the financial security of homeowners is more or equally affected by the current state of the housing market than is the financial security of renters.
In the face of this instability, the changing economy, and a struggling job market, policymakers must find new ways to drive sustainable, long-term growth. The role of the housing market is integral to that discussion. It’s critical that rental housing and homeownership be considered equal partners in any solutions.
Americans should think carefully about their housing options. If our nation has learned one thing in the past few years, it’s that buying a house is not necessarily synonymous with financial security, stability, and peace of mind. Finding an affordable home that makes us feel secure and allows us to pursue our hopes and dreams is the ultimate quest. Apartment living has been and continues to be a central strategy for reaching those goals.
Douglas S. Culkin, CAE, is the president and CEO of the National Apartment Association, based in Arlington, Va.