A new Freddie Mac survey profiling renters and owners finds that an unprecedented number of renters—84 percent—believe renting is more affordable than owning, an all-time high for the survey and up 17 percentage points from two years ago. The number is even higher for Baby Boomers surveyed with 87 percent reporting renting is more affordable than owning, up 6 percent from last year.
Despite those numbers, the survey may be raising alarm bells about the impact of rising housing costs for many renters’ budgets as 42 percent of renters reported paying more than one-third of their income for rent, up 8 points from April 2019. By comparison, 24 percent of owners reported paying more than one-third of their income for their mortgages—a number that has not changed in recent years.
The report, Profile of Today’s Renter and Owner, also found that 67 percent of renters have made spending changes or have moved to afford their monthly housing payment, up 5 points from last April. That number increased quite a bit for rural area renters with 70 percent saying they made changes to afford their monthly rent payments, up from 59 percent in April 2019.
And half of all renters are finding it difficult to find affordable housing that is close to their jobs, up 22 percent since last April. For Millennials, 51 percent reported finding it very or fairly difficult to find affordable housing near work and 39 percent of Generation X. An increasing number of homeowners surveyed (38 percent) also reported finding it very difficult or somewhat difficult to afford housing close to their jobs, up 13 points from last April.
The top financial concern of tenants (69 percent) is their rent going up, according to the survey. A similar amount (68 percent) worry about not being able to pay for larger expenses, compared to 49 percent of homeowners, because of housing expenses.
Strong Housing Market
David Brickman, Freddie Mac CEO, said in a prepared statement that the survey showed that overall the housing market is strong, with Baby Boomers in particular, tending to be more satisfied with their current housing situations than younger generation who may still be struggling to determine if they should rent or buy a home.
He noted supply and affordability constraints may contribute to that dilemma. But he said the low mortgage rate environment may inspire both renters and owners to consider moves this spring. The survey found 46 percent of homeowners would renovate their properties within the next 12 months and 29 percent said they would refinance their mortgages because of low interest rates. Forty percent of renters said they would take advantage of the lower interest rates to buy a home. When breaking that statistic down by age group, however, the survey found only 11 percent of baby boomer rents would buy a home compared to 54 percent of younger Millennials and 40 percent of older Millennials.
The survey found a majority of renters (62 percent) continue to be happy with their rental experience, down from 66 percent in 2018. In another sign that they are happy with their rental homes, 73 percent of tenants feel that minor or no renovations should be made to their properties.