Since the turn of the millennium, nearly all of America’s 50 largest cities have seen a rise in their rentership rates, the percentage of homes that are rented rather than owned. In all but a few of these cities, the ascent has been far from smooth.
Since the turn of the millennium, nearly all of America’s 50 largest cities have seen a rise in their rentership rates, the percentage of homes that are rented rather than owned. In all but a few of these cities, the ascent has been far from smooth.
While the housing boom in the early part of the century’s first decade led to an increase in homeownership, the financial crisis and subsequent uneven recovery have resulted in more households choosing to or being forced to rent, especially in the country’s largest urban centers.
Home values have bounced back to their pre-recession highs in most of the country’s largest markets, at a pace faster than job and wage growth. As a result, renting is increasingly the only option for a large share of residents, especially younger generations looking to make their first home purchase. Fortunately, the stigma surrounding renting has receded in recent years, with a large portion of millennials in major markets choosing leases over loans. Indeed, the rentership rate has increased in each of the country’s 50 largest cities since 2006, and in all but six of them since 2000.
As of June 2018, 35.7 percent of all occupied homes across the country were rented. This is a slight decline from the end of 2016, when the rate was 36.3 percent, but an increase from earlier this century. In 2006, 31.1 percent of all occupied homes were rented; in 2000, 32.5 percent were.[1]
Unsurprisingly, these rates are much larger in the nation’s largest cities.
In 2016 – the most recent year for which city-level data are available – 69.9 percent of homes in Miami were rented, the highest rate among the top 50 cities. Following closely behind were New York City (68 percent), Boston (65 percent) and Los Angeles (64.1 percent). Overall, 29 of the nation’s 50 largest cities were majority rented in 2016 (including Denver, which was almost perfectly spit between renters and owners). In 2006, that figure was only 16; in 2000, 20.
The housing boom and resulting bust were partly mirrored by the rise and subsequent decline of homeownership rates. Lax lending policies, a growing economy, and the enduring American ideal of homeownership resulted in most major cities – and the country as a whole – seeing a larger share of homes owned in 2006 than in 2000. Through the recession and subsequent recovery, however, that trend has largely reversed.
Many cities experienced this roller coaster-like ebb and flow, but none more so than Atlanta, which saw its rentership rate fall from 56.3 percent in 2000 to 50.4 percent in 2006, only to see it rise again to 58.7 percent in 2016. In total, that is a 14.2 percentage point swing. Other cities saw similar swings – Honolulu, Hawaii (12.8 percentage point swing); Nashville, Tenn. (11.9 percentage points); Las Vegas (11.7 percentage points); and Washington, DC (11.5 percentage points).
On the other hand, some cities blew right through this ebb and flow. Memphis, Tenn., experienced a rise from 44.1 percent in 2000 to 45.1 percent in 2006 and 56.1 percent in 2016 – an overall 12 percentage point increase (including an 11 percentage point increase in the decade between 2006 and 2016) and an affirmation of its status as a majority renter city. Similarly, Phoenix, saw little change in its rentership rate during the early part of the century, only to see it increase substantially (from 39.4 percent to 47.9 percent) in the ten years that followed.
Philadelphia and Jacksonville, Fla. are other large cities that avoided this roller coaster-like ebb and flow through the late aughts, although neither of them is a majority renter city yet. Albuquerque had the most consistent rentership percentages in the early part of the century, with its 2000 rate and 2016 rate each measuring 39.6 percent.
Finally, not all cities experienced substantial or consistent increases in rentership. In fact, some of the nation’s signature cities had a lower percentage of homes being rented in 2016 than in 2000. Three of the nine most expensive cities in the country, in terms of median home value, have seen their rentership rates decrease since the turn of the century: San Francisco (3 percent decline); Boston (2.8 percent), and New York City (1.9 percent). Each of these three began the century as strong majority renter metropolises, so a decline of this sort may not be terribly surprising. On the other hand, each of them experienced a remarkable boom in the tech sector over that same period – jobs often filled by a younger, more transient demographic that prefers renting to the longer-term commitment of homeownership.
The median rent across the country is $1,440 per month, up 1.3 percent over the last year and unchanged over the last month. Overall, rent growth appears to be steadying after several months of 2+ percent annual gains. Should this trend continue, especially as home values and interest rates continue to rise, the share of renting households may very well continue its ascent.
[1] Zillow Analysis of US Census Bureau, Current Population Survey/Homeownership and Housing Vacancy Survey, July 2018; U.S. Census Bureau, Census 2000, and US Census Bureau, American Community Survey, 2006 and 2016
