Why Millennials Want Shorter Leases
The supply/demand imbalance and sky-high rents have led to an emerging trend in the apartment industry.
As rent prices continue to rise and a growing number of households are choosing to rent instead of buy, some individuals are looking to alternative options like Airbnb and other short-term living solutions that offer a more flexible lifestyle instead of committing to a year-long lease. Sky-high rents have resulted from demand outpacing supply in most markets, and in 2015, renter households spent $535 billion on rent, up $19 billion from 2014, Zillow reported.
To meet this new demand, some property owners and rental platforms are beginning to list short-term rentals along with long-term rentals. One such company is RadPad, a Los-Angeles based startup founded in January 2013 that caters to younger renters by offering a free mobile app for its listings.
“We’ve seen a lot of changes since we started RadPad three years ago,” Jonathan Eppers, CEO & co-founder of RadPad, told MHN. “About a year and a half ago, we started seeing a lot of people on RadPad looking for short-term leases. We found two-thirds of renters said they were looking for a place for a year or less, which was fascinating to us.”
He added that this demand “isn’t just a couple thousand, we’re talking hundreds of thousands of renters a month telling us they want a place for no more than year.” Renting gives people the opportunity to pick up their bags and move, so “if you’re stuck in a long-term lease, it makes it harder to move. Believe it or not, I think for a certain but growing percent of renters, a one-year lease seems like it could be too long.”
Doug Culkin, CEO & president of the National Apartment Association, echoed this sentiment, adding that millennials today are attracted to short-term renting because it fits with their mobile lifestyle. “While older counterparts have stayed with one company for an extended period of time, the U.S. Bureau of Labor Statistics found that millennials change jobs three times more often than previous generations—staying with the same employer for an average of three years,” Culkin told MHN. “Millennials do not want the burden of home ownership during this transitional stage of life. A shorter-term rental is appealing to many young renters who aren’t sure they’ll even stay in a particular job or city for an entire year.”
This trend of increasing interest in short-term rentals, and the success of platforms like Airbnb, is reshaping the real estate industry, as Stuart Eisenberg, a partner at BDO USA discusses in his guest column for CPE.
But the demand isn’t only on the renter side, Eppers said. As RadPad expanded its supply side in the last year, the company has “started talking to landlords, and we’re finding some of them—and it seems like it’s been picking up steam in the last six months—have been experimenting with listing short-term rentals,” Eppers said. “They’re taking those rentals off the market that would typically go to renters looking for a one-year lease and putting them up on sites like Airbnb to see if they can rent them out more short term.” He added this also allows property owners to see if they can make more money, with the ones he’s talking to saying they can make 30 to 40 percent more per month on a short-term unit.
“Apartment owners and managers recognize the need to cater to this new generation of renters, and many are now offering at least the option of a six-month lease,” Culkin added. “Independent rental owners tend to be even more flexible than some larger management companies, and often have month-to-month leases available.”
RadPad announced in early February that it was opening its platform to short-term rentals, partnering with rental providers such as onefinestay, which offers weekly luxury home rentals, and HomeSuite, which offers months-long furnished condos to rent. Property owners using RadPad can also list their short-term rentals, though RadPad sets a minimum stay of one week.
With property owners taking long-term rentals off the market, the already strong supply/demand imbalance that is driving pricing up is only made worse, Eppers said. He believes that by offering short-term listings on RadPad, it keeps these rentals “in the hands of renters instead of travelers. We keep the listings in the rental market instead of putting them on sites like Airbnb where the [short-term rentals] go to those who have no interest in living in the neighborhood, who oftentimes treat the place like a traveler would and not like someone who lives there,” Eppers said.
Eppers also hopes that by putting more short-term options on the market, it can convert some of the short-term renters into longer-term renters, “which I think is good for the entire marketplace.”
While Eppers said renter feedback about the short-term options has been positive, a common request is for more inventory. He said the company is working to grow by reaching out to property owners already listing on RadPad—which are mostly small- to medium-sized, owning less than 50 units—to let them know they can now list short-term rentals. RadPad also prompts property owners coming to list their long-term rentals to see if they’d be open to a monthly rental option, which Eppers said many signing up are interested in to see if they can get more renter interest.