In the wake of 2008’s financial crisis, more and more Americans — from fresh-out-of-the-nest Millennials to young professionals with new families to established adults — are choosing renting over property ownership. This trend is true of commercial as well as residential properties, and it’s supported by solid fundamentals.

The Trulia Report

A February 2016 study from online real estate giant Trulia supports this trend, with the data showing a 5% increase in the renter to owner ratio. The report speculates that 26-to-34 young professionals — the most typical age group for first-time property owners — were economically unable to make the jump to buying property, choosing instead to stay in the rental market far after what was typical in previous years. Individuals aged 35 to 54, another prominent property-owning demographic, also saw a jump in rentals due to layoffs and foreclosures. Rental rates among 55+ households increased as well, although less dramatically than in the younger age ranges.

Urban Hubs

The population in urban hubs is increasing. Large, dense cities such as New York City, Austin, Chicago, San Francisco and Seattle offer cultural capital, plentiful jobs, and vibrant nightlife options. These factors, in turn, create a huge potential to profit from renting. In fact, almost 60% of all property owners in New York are currently renting. The Big Apple shares this distinction with Los Angeles and San Francisco, the only two other American cities with a rental population greater than 50% of the overall.

Rising Rates

So what does this mean for the renter side of the market? Increased demand means increased opportunity to raise prices, right? Not quite. Even after experiencing a flood of renters, the LA rental market’s rates remained stagnant, and the city experienced the smallest growth in the nation. Conversely, high-wealth regions that have come into high demand over the last decade — most notably tech hubs like Seattle and the Silicon Valley area — saw skyrocketing prices.

Ultimately, the study concludes, the actual rent rates are highest in these areas, but the rental burden — that is, the proportion of wages paid toward rent — falls on service and blue collar workers. As the trend shows no signs of slowing down, it’s likely that policies that currently encourage new construction and environmentally-inefficient properties will shift toward favoring scalable, eco-friendly rental units.

New Vistas Corporation team is here to provide exemplary property management services to clients across New York, New Jersey, Pennsylvania and Delaware. We help property owners avoid the burdens of large, thriving portfolios—staying on top of repairs, scheduling maintenance, attracting tenants, filling vacancies, and much more. We can handle any size portfolio. Please visit our homepage to learn more.