For nearly a decade, 8.3 million households have joined the US renter pool. Of that increase, six million can be attributed to the decline in the homeownership rate – in other words, most of the increase in the renter pool is a result of homeowners suffering a foreclosure or because existing renters have not moved into homeownership. At the same time, we have seen significant growth in the prime renting age cohort (those aged 20-34-years-old) as millennials have started to form their own households. However, there has been even greater growth – though far less press – around the Baby Boomers as renters. The growth in renter households for those over age 55 is more than 3.5 million, compared to 1.5 million for those under 35-years-old.
Clearly, the past decade has been marked by a long-term trend of Baby Boomers joining the renter population. Overwhelmingly, these renters are empty-nesters, still active in the workforce, who no longer want to maintain large homes or spend their time in traffic. A significant portion of this population are moving into city centers and seeking out luxury developments with great amenities that make life convenient and fun. Unsurprisingly, the multifamily market has seen a spike in renters of luxury product across older cohorts.
“Renters aged 55–64 are accounting for the largest increase in the absolute number of renter households, due not only to their sheer numbers, but to an overall shift towards renting,” explained Suzanne Mulvee, CoStar Portfolio Strategy Director of U.S Research. “The increase in older, often more affluent renters has been a boon for the renter-by-choice market.”
That said, Mulvee added that it’s unlikely that such a dramatic cutback in homeownership rates will be seen again soon, adding that realistically, the average annual renter demand will grow at a slower pace over the next five years, with the exception of the 65-plus cohort. The market can likely expect that the biggest gains in the renter pool over the next five years will be from those under 35, who, at least initially, are more likely to opt for Class B than A units. The continued strength in older households, both renter and homeowner, should fuel demand for age-restricted housing.
The bottom line? The rise of the renter continues, and various cohorts are expected to contribute to growth and demand in the future.