Why renters are increasingly outnumbering homeowners in the suburbs of major cities

John Yang:

As the cost of homeownership soars across the country, renting has emerged as an increasingly popular alternative, and not just in cities, but in suburbs, too. An analysis of Census data by Point2Homes, an online marketplace for rental homes, found a steady rise in the number of renters in suburbs surrounding the country's 20 biggest metropolitan areas. Some of the big reasons the shortage of affordable housing, coupled with the rising cost of homeownership.

Doug Ressler is a manager of business intelligence at Yardi Matrix, which is a sister company to Point2Homes that creates software for the real estate industry. Doug, how big a piece of this is affordability, or are there other factors driving this?

Doug Ressler, Yardi Matrix:

It's a very significant piece. This really has started since 2008 with the financial crisis when there were a lot of evictions and home turnovers. And exponentially the demand kept growing, but the supply did not.

So over the course of the last 10 to 15 years, this problem has been exacerbated and will continue to grow until we find reasonable solutions to the issue of affordability.

John Yang:

You call it a problem. What's the — what's at issue here? What's, what's the problem, I guess of people deciding to rent rather than buy?

Doug Ressler:

Well, the problem is, prior to 2008, you would see a migration pattern of folks who rented, moving out, starting households, and buying homes that has been abbreviated because of the cost of a home, the lack of supply, and the affordability of the home. So what you have is you have demographic groups renting longer and not being able to purchase a home.

John Yang:

Now, I know your report said that of the roughly 1,500 suburbs you looked at, 203 were majority renters. Renters outnumbered owners. Some of them were around military bases, where you'd expect a transient population. But was there anything in common or a common thread among the other — the other places?

Doug Ressler:

What you saw is typically student centers, academics, universities. What we found in addition to the military, that people drive their roots deep and they tend not to migrate great distances. Migration patterns are down from what they were three years ago with the pandemic.

And so that mobility has decreased. And what people are looking at is where to find the best affordability within a general geospace that is very small.

John Yang:

You said that sort of the progression of starting out in the city, renting an apartment, moving out to the suburbs, buying a home is changing. Are the demographics changing or is it just that the people who move out to the suburbs are renting rather than buying?

Doug Ressler:

It's certainly the demographics. What we find is that Gen Zers typically like urban cores. They like the social environment. They like the availability of restaurants and social amenities. What we find with Millennials is that they are looking starting a household, they have children, they're looking for better school systems.

John Yang:

Beside other than that, the improvement of school systems is there. Are they changing the culture or the nature of suburbs in any way?

Doug Ressler:

They are. And there's also pushback in terms of that. You have NIMBYism, which means not in my backyard, that don't like to see rental communities established.

What we have found is, though, through studies that have been conducted by a myriad of people, that the ability to create households, either rental or purchase, adds to economic vibrancy in a given area. It doesn't detract from it.

John Yang:

Builders and developers have noticed this trend and they're focusing more on multifamily residences rather than single family residences. Could we reach the point where there's more choice, more inventory among multifamily residences instead of single family homes?

Doug Ressler:

We're already beginning to see that inflection in terms of the BTR community, the build to rent community is being established. So that whole niche market has grown and is continuing to grow.

John Yang:

What is it going to take to turn this around, to change this trend?

Doug Ressler:

It's going to take a collaboration between governance and business. And typically much of this is really situated at the local level. So we really see it as a collaboration of all three groups, not just necessarily one group in general.

John Yang:

Doug Ressler of Yardi Matrix, thank you very much.

Doug Ressler:

Thank you. Privilege.