National resident satisfaction hit a four-year high in the first quarter of 2018, with 77.0% of residents reporting they were satisfied overall with their renting experience.
This increase follows three years of steady resident satisfaction rates that hovered between 76.6% and 76.8%. These numbers are based on responses to an online survey of approximately 4 million apartment units annually that Kingsley Associates conducts on behalf of its clients. The findings reflect responses received between April 1, 2017, and March 31, 2018.
Of the top 11 U.S. markets, renter satisfaction increased in eight and changed by less than 1.0% in all but two. The largest variation in satisfaction occurred in Denver, with 2.6% more residents reporting they were satisfied compared with a year ago. The increase of satisfaction in New York over the past year followed close behind, with a gain of 2.3%.
Accelerated Growth in Resident Renewal Intent Begins Again
After six months of nominal change in resident renewal intent throughout 2017, the new year started with a jump in renewal intent, from 53.7% to 54.6% of residents intending to renew their lease. The notable increase follows the trend prior to the start of July 2017, when renewal intent rose 2.6% over just 12 months.
At the market level, differences in renewal intent also underwent sizable shifts. Nine cities experienced a change of over 1.3% in renewal intent compared with a year ago, with the largest change topping out at an increase of 6.3%, in New York. Boston not only had the highest resident renewal intent in 2018 Q1, at 61.9%, but also had the top satisfaction rating, with 82.5% of residents satisfied.
Value for Amount Paid Driving Increased Resident Renewal Intent
As seen in past quarters, the movement of resident renewal intent mimics the change in residents’ satisfaction with value for amount paid. In 2018 Q1, the percentage of residents who were satisfied with the value they received for the amount of rent they paid increased by 1.4%, to 55.9%.
This correlation is apparent at both the national and market levels. The largest changes in both renewal intent and satisfaction with value for amount paid occurred in New York, with increases of 6.3% and 6.9%, respectively. As with renewal intent, Boston also has a large percentage of residents satisfied with value for amount paid, second only to Atlanta.
If a resident feels satisfied with the value they receive from their apartment experience in relation to how much they're paying in rent, there's an improved chance the resident will renew their lease. The top reported factors that influence value perception are rental rate, location, apartment features, and interaction with the management team.
Apartment Floor Plan and Layout Influencing Resident Decisions to Lease and Renew
Over the past year, there has been very little change among the renewal factors that influence a resident’s intent to renew their lease, with the exception of one factor: the floor plan. Compared with a year ago, an additional 3.1% of residents now claim that floor plans influenced their intent to renew their lease, making it the fourth–most important renewal factor for residents who are likely to renew. Not only does the floor plan affect a resident’s renewal intent, but 83.3% of residents also said the floor plan influenced their decision to lease at a particular community.
While the most desired floor plan is currently a one-bedroom, with 44.2% of residents favoring that size of unit, the desire for a two-bedroom unit isn't far behind, with 42.7% of residents hoping to find a two-bedroom. In just four months, the desire for a one-bedroom unit has decreased by 1.0%, while the desire for a two-bedroom has remained steady, and the demand for a three-bedroom has climbed 0.3%. The increase in preference to rent a larger unit may be due to the changing renter pool.
Over the next five to 15 years, growth is projected among the segment of the renter pool comprising multigenerational households, downsizing baby boomers, and younger residents with children, creating a need for larger apartments. Among the latter cohort, 66.7% of residents who live with children want a two-bedroom apartment, and 21.2% even prefer a three-bedroom. The desire for a three-bedroom increases to 29.2% for residents who live with both a spouse and children.
According to the NMHC/Kingsley 2017 Renter Preferences Report, residents with children rent for two main reasons: convenience and flexibility or the lack of money saved for a down payment. However, as the renter pool ages, this shift primarily to renting is based on convenience and flexibility. Renters over the age of 35 who rent by choice heavily favor two-bedroom units over one-bedrooms, and 52.5% of renters over age 65 want a floor plan with two bedrooms.
With a growing number of families and baby boomers deciding to rent, it will be paramount for communities to provide larger units to fulfill the space needs and desires of the changing renter pool.