Rental Demand Outstrips Supply: Joint Center for Housing Studies

Contributing Writer, B2R Finance | Real Estate

By Kerry Curry, Contributing Writer

Rental demand is driving the housing recovery and should continue to be strong over the coming decade, according to a report from the Joint Center for Housing Studies at Harvard University (JCHS).

Rental demand rose across all income groups, age levels and household types, including significant increases among older renters and families. The study said demand continues to outstrip supply.

Although renter household growth is likely to slow from the current pace in the coming years, it should remain strong for another next decade, JCHS said.

The statistics on renter growth are nothing short of phenomenal:

  • More than 36 percent of U.S. households rented in 2015, the largest share since the 1960s.
  • The number of renters has risen by 9 million over the past decade, the largest 10-year gain on record.
  • The largest single-year gain in net new renter households was recorded in 2015 —1.4 million.

Single-family properties meet rental demand

The conversion of owner-occupied single-family properties into rental properties has helped meet the demand for rentals. Single-family rental properties now account for 40 percent of occupied rentals, up from 34 percent in 2005.

Multifamily construction is also on the rise although much of it is geared toward the higher end of the market. With a median asking rent of $1,381 per month last year, these residences are out of reach for the typical renter who makes $35,000 a year, JCHS reports.

Occupancy rates are high in many parts of the country, allowing rental investors to maximize profits. Rents on primary residences are up 3.6 percent in nominal terms over the last year.

Several factors are contributing to the strong rental demand. Delaying marriage and childbearing until later years (compared to previous generations) and a subsequent delay in first-time homebuying, are adding to the need for residential rental properties.

Housing’s headwinds

The nation’s rental market could continue to benefit from headwinds that still face the recovering housing market, including the foreclosure backlog, tight credit, impaired credit and weak income growth.

The housing market, now about four years into its recovery, came within 6 percent of its previous housing price peak earlier this year, and the number of homeowners with negative equity has declined significantly. Still, homeownership is at its lowest level in nearly half a century.

Rental outlook for investors looks bright

JCHS says the rental market should continue to expand at a robust pace in the coming years while the owner-occupied market continues along its path to recovery.

The report also notes that the need for more affordable rental housing has become an urgent issue for the country as a record number of renters pay more than half their income for housing, underscoring a major gap between market rents and the ability to pay.

In addition, millennials entering their 20s likely will increase rental demand as they graduate from college or leave home for the first time. Further, declining homeownership rates for older homeowners could also drive additional rental demand.

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 http://www.b2rfinance.com/apply-now and follow us on Twitter @B2RFinance.

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