Urban Institute: Renter Households to Reach More Than 50 Million By 2030

Contributing Writer, B2R Finance | Real Estate,Real Estate Investment

By John Beacham, Chief Investment Officer, B2R Finance

A recent report from the Urban Institute titled “Headship and Homeownership: What does the future hold?” highlighted the expected surge in renter households, from 40.7 million in 2010 to 47.9 million in 2020 and 53.7 million in 2030.

The study examined household formation and attainment of owner-occupied properties —nationally and by demographic groups over the past quarter-century—and projected future trends. The study also noted that while the absolute number of owner-occupied households will grow because of net new household formation, the absolute number of renters will grow much faster.

The study put forth competing scenarios regarding owner-occupied housing purchases and rental growth:

In one scenario of slow growth in housing purchases, renters would increase more rapidly than owners, from 40.7 million in 2010 to nearly 48 million in 2020 and 54.1 million in 2030. The net increase in renters during this decade would amount to 7.2 million, with another 6.2 million in the 2020s.

In a scenario of faster growth in housing purchases, the projections for renter growth are smaller but still robust. Renter growth in the 2010s, at 7.1 million, would still be nearly as strong as in the slow growth housing purchase scenario, which put it at 7.2 million, but would decline to 5.4 million owners in the 2020s.

THE TREND TOWARD RENTING

The rise in renters in the United States began to grow rapidly as early as 2000. Between 1990 and 2000, only 28 percent of new households formed were renters. Renter growth increased rapidly in the following decade with 45 percent of new households being renters between 2000 and 2010.

The Urban Institute expects the trend toward renting to continue. From 2010 to 2020, 11.6 million in net new households are projected to form, with 62 percent (7.2 million) being renters. For the 10.4 million net new households expected to form between 2020 and 2030, 56 percent (5.8 million) will be renters.

HOUSEHOLD WEALTH ON THE RISE

As more households turn to renting, household wealth is also on the rise. According to an article from Bloomberg on the most recent flow of funds report from the Federal Reserve, net worth for households and non-profit groups increased by $1.63 trillion from January through March, or 2 percent from the previous three months, to $84.9 trillion.

The report also indicated that gains in stock portfolios and higher property values helped fortify household balance sheets during the first three months of 2015. Sustained progress in the labor market may also spark faster wage growth, which will give American consumers the ability to boost spending. In fact, increased confidence in spending may already be starting to take hold, as retail purchases climbed 1.2 percent in May, according to a Commerce Department report.

CONCLUSIONS

Growth in the renter population is creating vigorous demand for rental housing and is positive news for those involved in converting single-family homes into rental properties.

Despite the increase in the renter population, it remains to be seen whether conversion of single-family properties into rental stock will satisfy demand, or if builders in fast-growth regions will expand the apartment supply quickly enough to meet the need for new rentals.

With this climate of rising rental demand, the Urban Institute study certainly gives single-family rental property and apartment investors plenty to consider as they look to future investment opportunities and the growing market need.

B2R Finance offers rental investors innovative lending products to help unlock equity from existing portfolios and provide the cash needed to build rental portfolios nationwide. For more information about how B2R can help you obtain rental property financing, just call 800-227-8107 or visit www.b2rfinance.com/borrowers and follow us on Twitter @B2RFinance.