Renters, especially Millennials, will continue to shoulder the brunt of the aftershocks from the worst economic slowdown in the United States since the Great Depression according to economists. They predict rents will continue to rise for the next two years, with rent increases outpacing the rate of inflation.
Capitalizing on this trend are multi-family housing developers who have increased their building activities to the highest level since 1988.
Devin O’Brien, strategic head of marketing for Zumper’s said the housing market overall was becoming “much more landlord-focused.”
“Real estate development should catch up to demand 2-3 years from now given the cyclical nature of the market,” he said.
Housing experts said this situation could not be worse for Millennials (those aged 22 to 34 years of age) who on average already spend 30 percent of their income on rent. In 1979 this figure for the same age group was 23 percent. This group was also experiencing problems finding suitable rental properties with the experts citing Miami as an example where only eight percent of rentals be able to be classified as ” affordable”. In Los Angeles this was 12.7 percent and in New York City 20.4 percent.
Data released in a statement by New York University’s Furman Center for Real Estate and Urban Policy show the supply of affordable rentals has not kept pace with demand in the U.S.’s 11 largest cities.
“With the exception of Dallas and Houston, the average renter in each metropolitan area could not afford the majority of recently available rental units in their city,” according to the statement. “The cities were even less affordable to low-income renters, who could afford no more than 11 percent of recently available units in the most affordable cities.”
Rents in San Francisco have skyrocketed 12.9 percent over the last year with the medium for a one bedroom rental unit being $3,500 per month The demand for rentals properties there is attributed to its proximity to Silicon Valley.
But at the other end of the scale, one-bedroom apartments in Detroit fetch on average $500 per month, a decrease of 11.5 percent over the past year.
The experts said rents were rising for several reasons including difficulties Millennials were experiencing securing mortgages and their preference to rent instead of buy.
Rising rents are also seeing many aged between 18-34 staying at home or moving back in with parents. In 2007 28 percent of this age group lived at home while last year that figure had risen to 31 percent.
Fannie Mae and Freddie Mac in attempts to revive home buying amongst Millennials was offering mortgages with just a 3 percent down payment but experts said this was not having much effect as yet.