For the last five years there’s been one main housing message. Fostered by federal and state governments, lenders and community groups, it’s this: Americans all want to become, indeed, should become, homeowners. With rising housing values delivering often significant equity wealth, that’s made a lot of sense.
But now a number of factors, including demographics, economics and so-called “smart growth” strategies, are pointing to a different message:
Forget owning. Being a renter may well be the best way to go.
And savvy apartment developers are working hard to make sure renters agree.
“More and more people are renting for lifestyle, not for economic reasons,” Kim Duty, a vice president of the National Multi Housing Council, reported at the recent National Association of Real Estate Editors and Reporters conference in New Orleans.
The numbers bear her out. In 1999, lender Fannie Mae asked people why they rented. Some 28 percent said it was out of choice, not necessity, and 40 percent reported that home ownership was not a priority.
Moreover, the fastest growing segment of apartment dwellers are households earning $50,000 or more, according to an analysis of Commerce Department data.
“These are households that clearly could buy, but are renting instead,” Duty said. “The question is why.”
She offered a couple of answers.
Having raised their children, married Baby Boomers are tiring of the suburbs, the traffic and home maintenance, and are moving back into cities. Some buy condos. (In Seattle, there are 17 condos for every 100 rental apartments.) But others opt to simplify their lives and rent instead.
Thanks to a 1997 federal tax change, many home sellers have no need to buy another house to avoid paying capital gains tax. A Multi Housing Council analysis “suggests the number of apartment households could grow more than 10 percent over the next several years due to the change in tax law,” Duty offered.
There are additional reasons renting will continue to be a growth industry, she said.
A big one is demographics. The number of people in the 20-29 age range, a group that traditionally rents, is no longer dropping and is now increasing.
Moreover, there’s a major change under way in family composition. Duty points out that married couples with children have been declining in numbers since the 1970s. Projections from 1995 to 2010 show that single people, childless married couples and roommates–all groups likely to choose apartment living–will be the fastest-growing segments of the population.
Then there’s the push from public policies. Large cities, such as Chicago, Seattle, Los Angeles and Atlanta, are wrestling with housing affordability, sprawl and the traffic congestion they bring. Others, including Philadelphia and New Orleans, face urban decay. Multifamily units are seen as “smart growth” answers to these problems, Duty said.
Thus it’s no wonder that in big cities, multifamily housing construction has increased from 33 percent of all residential building in 1992 to 55 percent in 1999, according to statistics from the National Multi Housing Council.
Along with the change in who rents has come a change in who owns apartments, Duty added. “Now they’re more businesses that are in it for the long term.”
