The Rise of the Forever Renters
Written by Chicagoland 1031 Exchange June 27, 2024
In December 2023, the Wall Street Journal published “The Rise of the Forever Renters.” The article examines a shift in housing preferences for people who could afford to purchase a home but are choosing to rent instead. Higher-end multifamily properties and built-to-rent properties have been preferred investment segments of the real estate market by many in recent years, and it appears this subcategory of real estate could still be one to watch as an investment opportunity moving forward.
According to the article, between 2007 and 2022, the number of people living in rental housing in the U.S. increased by 15%, reaching 103 million. While high interest rates and a housing shortage are pushing some would-be homeowners toward renting, more and more people are simply choosing to rent. This change indicates a broader societal shift in housing across different age groups, driven by lifestyle preferences and financial constraints.
The shift is particularly evident among younger professionals, with many expressing that it’s not a matter of affordability but a conscious choice based on perceived value. They prefer prime locations, convenience, and amenities of high-end rentals over the responsibilities and costs associated with homeownership. High-income earners are also increasingly choosing the rental lifestyle. In 2022, the number of renter households earning over $200,000 was four times higher than in 2010. Many older adults also prefer renting, highlighting the appeal of low-maintenance living and downsizing that rental properties offer.
According to the Wall Street Journal, this increase in demand is resulting in strong property-level performance. The Heron building, a luxury apartment complex in Tampa FL, surpassed 95% occupancy seven months after opening. It also states that Built-to-rent communities designed to mimic the look and feel of traditional suburban living have occupancies exceeding 97% nationwide.
Occupancy rates are only one of many important metrics to evaluate in a multifamily investment. At Chicagoland 1031 Exchange, we look at other data points including rent growth, lease renewals, loan terms, and local market performance to determine if an investment might be suitable for our clients. If you would like to learn more about luxury multifamily investments, and/or compare them to other types of real estate investments, contact our advisors today.
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