Economy Watch: Renter Household Growth Likely to Slow

Following an unprecedented run-up in demand over the last decade, rental household growth is expected to decelerate in the coming years, according to a recent Harvard Joint Center for Housing Studies report.
Source: Joint Center for Housing Studies of Harvard University
Source: Joint Center for Housing Studies of Harvard University

U.S. rental housing markets have experienced an unprecedented run-up in demand over the last decade, with growth in renter households averaging just under 1 million annually since 2010, according to Harvard University’s Joint Center for Housing Studies recently released 2017 rental housing report.

But the surge in demand now appears to be ending, with the three major government surveys reporting a sharp slowdown in renter household growth in 2016, though admittedly the estimates in those reports vary widely: 136,000 to 625,000 households. In any case, early indications for 2017 suggest a further deceleration in rental household growth, with one survey showing essentially no increase and another posting a substantial decline.

Even so, according to Joint Center projections, the number of renter households will increase by nearly 500,000 annually over the ten years from 2015 to 2025—still a robust pace by historical standards. The sweeping changes in the nature of rental demand seem likely to persist.

In particular, renting now appears to have greater appeal for households that could afford to buy homes, the Harvard report said. In 2006, 12 percent of households earning $100,000 or more were renters. In 2016, that share exceeded 18 percent—a cumulative increase of 2.9 million renters in this income category. Those high-income households drove nearly 30 percent of the growth among renters over the decade.