Demographic Headwinds Only Modest Weight on Renter Turnover
Americans are moving less than at any point in recent history. We’ve explored possible reasons for this trend among homeowners. Now we turn to renters.
In the 1980s and ‘90s, roughly one in three renter households moved each year. By 2016, the proportion had declined to almost one in five. The migration rate declined across all age groups except for the oldest renters — and younger adults saw the steepest decline: The share of young adult renters aged 24 to 34 who moved in the prior year decline from around 40 percent in 2000 to 30 percent in 2016.
Some of this shift is due to population aging and a sharp increase in the number of older adults – who tend to move less frequently – among the renter population.
In 2005, 17.3 percent of all adult renters were college age (between 18 and 23); by 2016, only 14.1 percent of renters were that age. Over the same period, the share of renters who were young adults, middle-aged and elderly remained relatively steady. The only age group to see an increase in their share of the renter population was retirement-age adults (age 55 to 69), which grew from 10 percent of the renter population to 14 percent. Of course, some of the seemingly spectacular growth has been driven by the aging of the Baby Boomers, who moved into their retirement years over the past decade.
Looking at the share of people in each age group who rent, young adults (up 9.3 percentage points between 2005 and 2016) and middle-aged adults (up 9.2 percentage points) saw the largest increases, while the elderly (up 1.7 percentage points) and people who were college age (up 2.5 percentage point) saw the smallest increases.[1] However, it is notable that for all age groups, the share who rent increased over those 11 years.
A second possible headwind to mobility among renters has been the shift toward the renting of single-family homes. Among young adults, renters of single-family homes have always tended to move less often than apartment renters. And single-family home rentals is one of the fastest growing market segments. (Among older adults, there are no meaningful differences in the mobility rates among renters of single-family homes and apartments.)
However, the twin headwinds of an older renter population and the growth in single-family home rentals have been a relatively modest weight on the aggregate mobility rate: At most, these two factors explain about a quarter of the decline in renter turnover between 2005 and 2016. If the age and housing structure of American renters had been the same in 2016 as it was in 2005, 23.4 percent of renters would have moved during the prior 12 months instead of 22.0 percent, still well below the 26.6 percent who moved in 2005.
So what explains the rest of the decline?
Deteriorating rent affordability is one possible explanation. In less affordable markets, local renters tend to move less often, particularly when rents are rising quickly – a trend that is true for all age groups.[2] To some degree, this is driven by the expensive coastal California markets – notably Los Angeles, San Diego, San Francisco and San Jose – where local policies such as rent controls probably play a role in lowering renter turnover. The trend moderates, but still holds, if we drop those four markets from the analysis.
However, from 2005 to 2015, renter migration did not decline more in markets with the worst rent affordability or in markets with the worst deterioration in rent affordability.
This leads us to believe that a more important driver of declining renter turnover could be the growth of renting in markets where turnover has historically been lower. That would include places where local policies such as rent control have long weighed on renter mobility, including the four California markets mentioned above. Other, unexplored explanations could include better suitability matches between renters and the units where they live, and fewer renters able to transition into homeownership.
Related:
- Need a Raise to Cover That Rent Increase?
- An Inventory Quandary: Three Theories for Why People Are Moving Less
- Without Spending More, Some Renters Could Likely Afford to Buy Above-Average Homes
[1] Some of the relatively small increase in renting among college-age adults is due to more living with parents or other family members who own the home.
[2] In this analysis, we exclude renters who moved to a metro from out of the region (cross-PUMA moves) since fast-growing markets will attract newcomers, which simultaneously can contribute to deteriorating rent affordability as rents rise and increase the share of the renter population who has moved during the previous 12 months. Our objective here is to assess whether existing local renters are more or less likely to move relative to rent affordability.