How to Save on Rent: Don’t Move
It’s easy to look up local apartments for rent and find out what landlords are charging – but only for the first year’s rent. Rates for renewed leases are not advertised, which makes it hard to compare what renters save over time if they stay put.
Landlords typically raise rents at a slower rate for renewing tenants, so people are bound to save some money by sticking around — but who knew it would be enough to pay for another couple months of rent? Nationally, renter households that moved within the past year paid 47 percent more in rent in 2015 – an average of $3,946 more annually – than renters who had renewed their leases for at least five years.
In some of the country’s hottest rental markets, the sum is even higher: Someone who moved in San Jose paid $9,266 more for rent in 2015, on average, than someone who had renewed for at least five years. San Francisco and Boston were runners-up, paying nearly $9,000 more.
The annual difference in Las Vegas was lower, at $842 – not enough for a month of median rent there, but it would cover two VIP tickets to a Cirque du Soleil show.
Perhaps that helps explain why renters are moving less: Only one in five renters moved in 2016, down from about one in three during the 1980s and ‘90s. It also could factor into why they feel confident they’ll be able to stay in their current homes for as long as they want to.
It’s likely these differences between rent renewal rates and market rates are going to be exacerbated in areas where rents are growing quickly — places like Seattle, Sacramento and Los Angeles — and less extreme in slower-moving markets.
In some markets, landlords raise rents on renewals at a faster pace than they do on new move-ins. Las Vegas is a good example: Renewing there cost a whopping 6 percent, on average, in 2015. Barring the cost of moving, it would have made more financial sense to find a new place in the short term, because market rates climbed just 2.4 percent, on average.
In other places, market rates are rising so much faster than renewal rates that in just two years, a renter could save money by renewing rather than moving. That was the case in Boston, San Diego, Tampa, Minneapolis, Austin and Los Angeles.
The data we used are from 2014 and 2015, the most recent available from the American Community Survey’s Integrated Public Use Microdata Series (IPUMS). With those data, it’s possible to see rent paid in 2015 and what year the renter moved in, but not to track rents paid over time.
The findings are time-specific, like the market. Based on the survey data, we estimated the market rate increase from 2014 to 2015 to be 5.6 percent, which is close to the 6.4 percent growth in the Zillow Rent Index from June 2014 to June 2015. However, ZRI growth from April 2016 to April 2017 was much lower, at 0.7 percent.