With U.S. homeownership at a 20-year low, more middle-age Americans are snatching up rentals, driving up the cost of apartments and other rental housing.
A new report by Harvard University Joint Center for Housing Studies found that households between the ages of 45 and 64 made up about two times more of the growth in renters last year as those younger than 35.
Between 2010 and 2014, 55- to 64-year-olds posted the largest increase in the rental market, even beating out millennials ages 25 to 34 who typically prefer to rent.
Wealthier people are also contributing to the increase in renters, as 43% of the growth came from homes in the top half of income scale.
The influx of middle-age renters – historically the most likely to own a home – is putting a squeeze on the rental market. In fact, the 2010s are on pace to be the strongest decade for renter growth in history, according the annual State of the Nation’s Housing report.
Demand for rentals has dropped the national rate of vacancy to 7.6%, the lowest is has been in almost 20 years.
With a limited number of available rental properties, rent increased by 3.2% last year, double the rate of inflation.
Demand was so high that the number of multifamily units that were started last year was the most since back in 1989, a senior Joint Center research associate said.
The report, now in its 27th year, underscores the shift toward renting and away from owning that began during the recession when many homeowners who lost their jobs also lost their homes in foreclosure.
Last year, the U.S. homeownership rate dropped for the 10th year in a row to 64.5%, with homeownership among 35- to 44-year-olds declining the most.
Economists predict high demand for rental housing will continue, keeping prices high until supply of new units catches up to demand. In addition, as the job market improves, more millennials are likely to find work and strike out on their own, leaving their parents’ homes for apartments.
The Joint Center predicts people currently under age 30 will form more than 20 million new households between 2015 and 2025, and most of them will be renters.
In addition, there will also be a large increase in renters over age 65 as the growing population of Baby Boomers leave their homes for lower-maintenance rentals.
