{"id":178612,"date":"2024-10-28T13:05:11","date_gmt":"2024-10-28T19:05:11","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=178612"},"modified":"2024-10-28T13:06:32","modified_gmt":"2024-10-28T19:06:32","slug":"renters-by-choice-becomes-growing-trend","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/renters-by-choice-becomes-growing-trend","title":{"rendered":"From Dream Homes to Dream Leases: The Rise of Renters By Choice"},"content":{"rendered":"\n

There\u2019s a peculiar narrative circulating the Internet about affluent lifetime renters who rent by choice rather than out of necessity. Stories <\/span>are going around<\/span> about people who prefer the freedom of movement and dislike the idea of having to do repairs abound. A few months back, <\/span>Architectural Digest<\/span><\/a><\/em> ran a story about lifetime renters, including a 71-year-old financial professional, a <\/span>Forbes <\/span><\/em>journalist, and a middle-class NYC family who love to travel.  <\/span><\/p>\n\n\n\n

From an investor\u2019s point of view, these are dream tenants: financially secure, likely to rent long term, and highly likely to look after a rental like it was their own home. <\/span>Now, <\/span>there is research data that<\/span> suggests that \u201cforever renters\u201d are on the rise across the U.S.<\/span> <\/span><\/p>\n\n\n\n

What the Data Says (Sort Of)<\/span><\/h2>\n\n\n\n

More specifically, properly <\/span>management software company <\/span>Entrata<\/span><\/a> conducted a survey of<\/span> 2,000 renters earlier this year and got some notable (and quotable) percentage points.<\/span> The most-quoted one is that 41% of renters surveyed said <\/span>that their<\/span> concept of the American Dream had \u201cnothing to do with homeownership.\u201d And 20%, or 1 in 5, said <\/span>that they<\/span> anticipated becoming lifelong renters \u2018\u2018by choice\u2019\u2019 rather than due to financial constraints. <\/span>In fact,<\/span> 17% of those surveyed said that what they specifically liked about renting was the <\/span>financial<\/span> freedom of not being tied to a mortgage. <\/span><\/p>\n\n\n\n

Many media outlets interpreted these figures as signs of a tectonic shift in Americans\u2019 mentality, or a \u201c<\/span>paradigm shift<\/span><\/a>,\u201d as <\/span>Rental Housing Journal<\/span><\/em> excitedly called it. <\/span><\/p>\n\n\n\n

You can probably sense that what\u2019s coming is a bit of skepticism about these figures. First, the Entrata survey\u2019s sample population was all people who lived in large apartment communities of over 50 units. We can deduce that these <\/span>were mostly urban<\/span> renters. <\/span><\/p>\n\n\n\n

Coincidentally\u2014or not-so-coincidentally, as we\u2019ll see\u2014<\/span>Architectural Digest<\/span><\/em>\u2019s interviewed forever renters all lived either in NYC (Manhattan, no less) or Seattle, <\/span>which is<\/span> well-known for its thriving renting culture with plenty of choice. <\/span><\/p>\n\n\n\n

I <\/span>have no doubt<\/span> that being<\/span> a lifelong renter in <\/span>Manhattan<\/span><\/a>, <\/span>Seattle<\/span><\/a>, or the <\/span>nicer<\/span> parts of <\/span>Miami<\/span><\/a> is <\/span>indeed a viable and even<\/span> attractive lifestyle choice, provided the renter has the means to sustain it.<\/span> Not worrying about roof repairs or yard work is <\/span>definitely<\/span> a pro of renting, especially if you <\/span>are frequently traveling<\/span>.<\/span> <\/span><\/p>\n\n\n\n

Moreover, the overall culture and how we fit into it <\/span>plays a <\/span>huge<\/span> part in<\/span> our decision-making.<\/span> As someone who lived in a large city for many years, I know that renting not only doesn\u2019t need destigmatizing there, it\u2019s so <\/span>normal<\/span> that no one bats an eyelid. This was so much the case that yours <\/span>truly<\/span>, too, professed her contentment to be a \u201cforever renter.\u201d<\/span><\/p>\n\n\n\n

Now, I live in the suburban Midwest\u2014and I can confidently tell you that no paradigm shift regarding homeownership is happening here. That\u2019s not because there are no options for renters. There are several new apartment blocks <\/span>in the vicinity of<\/span> where I live, most of them build-to-rent communities. The cheapest one in the least luxurious block is a small studio that costs nearly $1,300 per month\u2014about the same as a monthly mortgage payment on a decent two-to-three-bedroom home in the area. <\/span><\/p>\n\n\n\n

Whichever way you cut it, it doesn\u2019t make good financial sense, although the lack of available funds for a <\/span>down payment<\/span><\/a> without<\/span> a <\/span>doubt<\/span> keeps many people renting. The long list of available apartments in build-to-rent blocks <\/span>that came up<\/span> during my search suggests that they are not nearly at full occupancy. <\/span>Private landlords <\/span>able to<\/span> offer single-family homes have the edge in this area: Renters <\/span>just<\/span> get more space for their buck.<\/span><\/p>\n\n\n\n

Is There a Cultural Shift Toward Renting? <\/span><\/h2>\n\n\n\n

But the issue is <\/span>not<\/span> just the cost per square foot.<\/span> The deeper <\/span>issue<\/span> is the ingrained culture of homeownership in this are<\/span>a\u2014a<\/span>nd <\/span>many,<\/span> many <\/span>areas<\/span> across the country.<\/span> <\/span><\/p>\n\n\n\n

The further away you are from a <\/span>major<\/span> metro area, the more people tend to own <\/span>their own homes<\/span> than rent. And we all know <\/span>that you<\/span> cannot (want to) be what you cannot see. When everyone around you is a homeowner with a nicely maintained yard, you also want to be a homeowner. <\/span><\/p>\n\n\n\n

This isn\u2019t just this writer\u2019s opinion. <\/span>Forbes<\/span><\/a><\/em>, identifying the most- and least-competitive rental markets, points out that what\u2019s normal for an area is a <\/span>major<\/span> factor shaping the demand for rentals. <\/span><\/p>\n\n\n\n

No one will be surprised to see New York in the top five most competitive rental markets. Of course, New York is also unaffordable, but it also is one of those places where renting for many years or even a <\/span>lifetime,<\/span> has been considered normal for a very long time. Renting there doesn\u2019t necessarily correlate to low income, either: Some New Yorkers rent in the city while owning a home elsewhere; others live in rent-controlled properties and are happy with that arrangement.<\/span><\/p>\n\n\n\n

By contrast, the <\/span>Detroit-Warren-Dearborn metro area<\/span><\/a> is one of the least competitive rental markets. As <\/span>Forbes <\/span><\/em>explains, \u201cRenting isn\u2019t as common as homeownership in the Detroit metro area<\/span>, so<\/span> renters won\u2019t face strong competition in the market.\u201d <\/span><\/p>\n\n\n\n

This long-standing preference for homeownership checks out in another statistic: Whether people choose to <\/span>renew their leases<\/span><\/a> or not\u2014when it\u2019s a <\/span>real<\/span> choice rather than one dictated by the unaffordability of other available options. <\/span><\/p>\n\n\n\n

RentCafe did a <\/span>snapshot of the hottest rental markets<\/span><\/a> recently, looking at percentages of occupancy and renewal rates.  <\/span>There were some telling results: For example, suburban Chicago emerged as the <\/span>hottest rental market in the country because it has both<\/span> a very high rental occupancy rate (95.6%<\/span>)<\/span>,<\/span> and a high lease renewal rate of 69.5%.<\/span> By contrast, <\/span>Chicago<\/span><\/a> proper, while it does have<\/span> a high occupancy rate of 94.7%, has a lease renewal rate of only 58.7%.<\/span> <\/span><\/p>\n\n\n\n

In other words, people have to live in central Chicago for all sorts of reasons, but they don\u2019t necessarily want to stay. It\u2019s also worth noting that the high lease renewal rates in suburban Chicago are due to the overall low affordability of homeownership in the area more than anything else. <\/span><\/p>\n\n\n\n

The figures point out that this <\/span>lack of<\/span> an overall appetite for long-term renting is generally more pronounced the smaller and more rural you go in the Midwest.<\/span> For example, <\/span>Des Moines, Iowa<\/span><\/a>, has a lease renewal rate of 58.8%, and <\/span>the state of<\/span> North Dakota saw an even lower lease renewal rate of 55.8%. At the same time, it\u2019s worth noting that all <\/span>of<\/span> these places still have an occupancy rate of well over 90%. This means that people rent everywhere, and investors don\u2019t need to start worrying about not finding tenants in <\/span>small-town<\/span> Midwest. <\/span><\/p>\n\n\n\n

But it\u2019s worth knowing that the vast majority of renters in these areas are almost certainly not renters by choice and <\/span>mostly would<\/span> like to move on to homeownership as soon as <\/span>they can<\/span>.<\/span> If you\u2019re an investor in these areas, you should factor the possibility of high tenant turnover into your planning. When you <\/span>do<\/span> find a tenant who is content to rent for a longer term, know that you\u2019ve found a rare(ish) and valuable thing.<\/span><\/p>\n\n\n\n

Alternatively, seek <\/span>out<\/span> places with an established or emerging culture of long-term renting. How <\/span>to<\/span> find them? Here\u2019s a clue: Look for desirable, midsized metro areas where renting is both accepted and financially sound for the area. <\/span><\/p>\n\n\n\n

A good example would be a city like <\/span>Grand Rapids, Michigan<\/span><\/a>. <\/span>It <\/span>is not (yet) unaffordable<\/span> and has enough going for it to sustain the desire to live there longer term.<\/span> I <\/span>personally<\/span> know people who lived there initially for a short time but <\/span>ended up staying<\/span> for years.<\/span> It also has a <\/span>big<\/span> student population, <\/span>which contributes to the overall normalization of renting<\/span>.<\/span><\/p>\n\n\n\n

Final Thoughts<\/span><\/h2>\n\n\n\n

Far from a uniform paradigm shift toward renting as a choice, increased numbers of long-term renters mean <\/span>mostly<\/span> what they\u2019ve always meant: <\/span>a lot of<\/span> people who would like to own a home but cannot. <\/span>This isn\u2019t true everywhere, though, and overall desirable locations <\/span>do<\/span> have higher-than-average numbers of people <\/span>who are<\/span> happy to rent for longer.<\/span> <\/span><\/p>\n\n\n\n

If one of your goals as an investor is to <\/span>reduce tenant turnover<\/span><\/a>, then seeking out places with an established renting culture is well worth the effort.<\/span><\/p>\n\n\n\n \n

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<\/div>\n\n\n <\/div>\n <\/div><\/div>\n","protected":false},"excerpt":{"rendered":"

There\u2019s a peculiar narrative circulating the Internet about affluent lifetime renters who rent by choice rather than out of necessity. Stories are going around about people who prefer the freedom […]<\/p>\n","protected":false},"author":613618,"featured_media":176564,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[8,4433],"tags":[],"class_list":["post-178612","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-real-estate-trends","category-opinion"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/178612","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/613618"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=178612"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/178612\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/176564"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=178612"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=178612"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=178612"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}