Real Estate Trends Lending
Rental Demand Expands in the Suburbs - Prices Soar
Jun 29 2022 2 min read (360 words)
Rental demand continues to soar. An increasingly larger wave of Millennials and Gen Z are now entering this extremely competitive housing market. They are almost always priced out of owning a new home, and construction is still not able to keep up with demand. So, they turn to the most affordable option to them, renting. As much as 55% of suburban renters are younger than 45, with a median household income of $50,000.
RENTcafe released a report analyzing US Census data comparing 2020 to 2010 and found over 100 suburbs that transitioned to a majority of residents renting. Since 2010, 4.7 million people moved into the suburbs surrounding the nation’s 50 largest metropolitan areas, 3.7 million of them were renters, adding to the now 21 million people renting a home. Today, renters make up 39% of these suburbs.
According to Housingwire, “Out of the 1,105 suburbs analyzed, a total of 242 are renter-dominated, 103 of which were owner-dominated 10 years ago. This represents a 69% increase in the number of suburban areas where renters are the majority.” We can compare this to the only four suburbs that transitioned to owner-majority over the past decade. Also, suburban renters grew by 22% between 2010 and 2019, while homeowners only grew by 3%.
A large percentage of the suburbs where rental demand increased enough to make this switch are located around three metros: Washington DC (14 suburbs), Miami (13), and Los Angeles (12). Washington DC’s suburb, Merrifield, VA, saw a huge 87% increase, with 64% of the population renting.
RENTcafe predicts that another 57 suburbs will become renter-majority within the next five years. New houses simply aren’t being built fast enough to offset high demand and dwindling supply. Associate professor of sociology at Millikin University, Kenneth Laundra also believes that “with the increase in remote work, short-term projects and ‘side hustles,’ there’s every reason to believe that the future will be a more transitory, migratory existence. Most of this migration will be toward cities and urban landscapes, where even the suburbs will cluster most closely to urban areas.”
Suburbs in California and Florida are the most expected to transition to renter-majority. Aside from those, the Cleveland suburb of Maple Heights has the highest chance to transition in the near future. These are all great places to look for future investment potential as rental demand grows.
If you need help purchasing or rehabbing your investment property, Lend Some Money offers a variety of loan types, including fix and flip, rental, and new construction loans, that may fit your needs. Speak with one of our loan officers to learn more.