In the United States, there have been over 42 million renter households in 2015 amounting to 36% of all households nationwide. This is an increase by 1.4 million over the previous year and double the rate of growth in the previous decades (source: US Census).
- Shift from homeownership to renting in the US
Tightened credit requirements for single family home ownership following the financial crisis have led to a shift from home ownership to renting. Number of renter households grew with a CAGR (compound annual growth rate) of over 5% from 2005 to 2015, while owner households only grew by 1.5% in the same period.
- Demand for rented properties outpacing supply
The residential multifamily market is characterized by strong rental growth averaging at 3.0% p.a. nationally between 2010 and 2016 (source: Fannie Mae Research). Despite the increase in rents, the demand for rental housing continued to exceed new supplies. Since 2010, multifamily unit construction has been increasing every year with over 300’000 units being added to meet the high demand. Developers will continue to construct rental properties largely aimed at younger, high income tenants.
- Strong rental income growth and low multifamily vacancy rates
The median asking rent has increased at a rate of 4.3% p.a. countrywide and 5% p.a. in the Southern states in the last 5 years, whilst US-wide vacancy rates have been decreasing since Q3 2009 and have reached with 5% the lowest level in over 30 years (source: Fannie Mae Research).
- Secondary and tertiary market growth
Suburban apartment rent growth has exceeded urban apartment rent growth over the past 5 year. Given the demographic distribution and strength of the US job market, the supply-demand dynamics will likely continue to be favorable for the rental market in secondary and tertiary markets.