The original American dream was to own a home, start a family and obtain gratifying work. While most of those elements are still the same, recent years have acted as a catalyst for change, one powered primarily by millennials. Rather than buy a single-family home, it’s now become more common to rent. The rental market in general is booming figures suggest in the annual State of the Nation’s Housing report from Harvard’s Joint Center for Housing Studies. This demand has subsequently caused developers and contractors to push construction of new apartments, marketing towards the Gen Y demographic.
During the first quarter of 2015, the homeownership rate in the U.S. dropped to roughly 64 percent, which is as low as it’s been since 1993. The overall rate of individuals aged from 35 to 44 who own homes has dropped about five percent from 1993, which is a rate that hasn’t been seen since the 1960s. What those figures means for developers is an incentive to build more, and more often, because millennials are setting their sights on condo and apartment rentals, which is vastly different from Baby Boomers who were almost exclusively interested in homeownership.
With the number of renters increasing, it also means the overall rate of vacancies across the nation has dropped approximately eight percent, which hasn’t been seen in nearly 20 years.
Chris Herbert, managing director of the Joint Center for Housing Studies states, “Perhaps the most telling indicator of the state of the nation’s housing is the drop in the home ownership [sic] rate,” says. “This erases nearly all of the increase from the previous two decades. In fact, the number of homeowners fell for the eighth straight year, and the trend does not appear to be abating.”
According to the report, the number of new rental households has increased by 770,000 annually since 2004, the strongest 10-year period of rental growth since the late 1980s. Demand for rental housing is largely driven by Millennials, but previous generations are also contributing to the growing trend.
That strong rental demand across all age groups cut vacancy rates in 2014 to 7.6 percent, the lowest in nearly 20 years. It also saw rent increases by 3.2 percent last year – double the rate of inflation.
Continues Herbert, “Between the record level of rent burdens and the plunging homeownership rate, there is a pressing need to prioritize the nation’s housing challenges in policy debates over the coming year if the country is to make progress toward the national goal of secure, decent, and affordable housing for all.”
With builders building as quickly as possible to address the demand for residential and commercial real estate tenants, the issue of affordability will becoming a bigger issue. Also, along with viable rental options, the need to ensure spaces that are close to jobs, shopping, and transportation will need to be considered. With the surge of construction and influx of new rental population moving into certain areas of cities, the social ecosystem is beginning to be reshaped by Gen Y representing a different idea of what the American Dream can be.
US Glass Mag