Unexpected increase of renters ultimately lead to high rental affordability, study says

Since homeownership had decreased during the housing crisis, a new study said that 6 million would-be homeowners are most likely renting, instead of investing in the market.

Approximately one-third of would-be homeowners are now renting single-family homes, especially those aged 25 to 54, according to a new report released by The Mortgage Bankers Association’s Research Institute for Housing America (RIHA).

Due to the increase of renters over the past decade, rents have risen significantly. There is more demand than inventory. Before the housing crisis, rentals were expected to grow 4.4 million occupied units after 2006, thanks partly to the millennials. However, the demand instead grew to 6 million, while only 5.2 million units were added to the market.

“Demand for rental housing has greatly outstripped supply, rapidly pushing vacancies down and rents up even as incomes fell. The supply is still trying to catch up with the demand,” said RIHA’s Executive Director and MBA’s Vice President for Research and Economics Lynn Fisher. “In the middle of the last decade, right as the Millennials were anticipated to begin forming their own households and increase demand for rental housing, the supply side of the market stalled due to the turmoil in credit markets. At the same time, homeowners diverted from ownership piled into the rental market. The single-family rental sector certainly grew but was only able to accommodate some of the increase.”

New construction also suffered during this time, leading to a decrease in new homes being built.

The report ultimately suggests that while increased rents mixed with renters’ declined incomes have had an impact, the unexpected increase of renters is what has caused rents to skyrocket.