A new report on homeownership and household formation reveals some interesting findings regarding the market for rental properties in US. It finds that although new households are set to rise, the number of renters will greatly outpace the number of homeowners. This has considerable implications for buy-to-let properties throughout the US between now and 2030.
The Urban Institute’s latest report Headship and Homeownership: What does the Future Hold? looks at the evolution of homeownership and rentals over the next 25 years. The report puts particular emphasis on the huge millennial generation, now aged between 20 and 35, and a massive potential market for both resale and rental properties in the US.
Once a nation of homeowners, Americans are now less inclined to buy the property they live in. In 1990, 64 per cent of the population owned their home and by 2006, this figure had risen to its historic peak of 67.3 per cent. Since the US property bubble burst in 2007, homeownership has fallen and currently stands at 63.6 per cent. According to Urban Institute calculations, in 2030, just 61.3 per cent of Americans will be homeowners.
This fall can be attributed to several factors, particularly among the millennial group. These Americans are less likely to want to own their property because of affordability issues and the tendency to live longer at home with their parents.
The US population is growing considerably and this translates into a parallel growth in the number of households. The Urban Institute refers to household growth as “robust” and looks at whether the new households will buy or rent property. The report finds that “new renter households will outnumber new homeowners between 2010 and 2030”.
Specifically, 62 per cent of new households created between 2010 and 2020 will be renters (some 11.6 million households) and from 2020 to 2030, renters will equal 56 per cent of new households. This significant increase in the number of people in the US looking to rent property rather than buy has huge implications for the rental market and by extension, for the buy-to-let sector of the US property market.
High demand and rental rates
“This means there will be significant demand for new rental housing construction,” says the report and adds that “single family homes are shifting to renter occupancy throughout the nation.” Commenting on the report’s findings, Florida Realtors said that “rental growth will explode by 2030”.
The report makes various recommendations including the call for new housing to meet this demand. However, it points out that “it remains to be seen how much this shifting of the established housing stock will satisfy rental housing demand”. In this scenario, the report concludes that rents are “likely to remain high”.
Prices for rental properties in the US have risen considerably over the last year. Axiometrics reported a 5 per cent rise in Q1 this year with many locations in the US exceeding these. Localities in California and Florida showed particularly high increases such as the 6.7 per cent rise in rents for rental properties in Orlando and 9 per cent for Deltona properties.
Source: Urban Institute