In the vanguard of the rental boom: baby boomers. Many 50-plus, empty nesters still seek high-end amenities as they set aside the responsibilities of home ownership.
By Marilyn Kennedy Melia
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The last decade saw the biggest jump in Americans renting, rather than owning, of any 10-year period on record, finds a recent Harvard University study.
No surprise, given that millions of owners lost their homes in foreclosures or distress sales and that young adults have struggled to meet stringent buying requirements.
Unexpectedly, though, more than half of the 9 million additional renters are households aged 50 and over: baby boomers.
Some boomers were victims of the housing collapse. However, the sharp rise “likely also reflects some combination of voluntary return to renting among empty nesters,” notes Jonathan Spader, of the Joint Center for Housing Studies at Harvard University.
“When boomers were entering their 20s, the de-facto rules were strictly, ‘get a job and get a mortgage’,” says Alan Feldman, CEO of Resource Real Estate, a Philadelphia real estate investment firm.
A substantial slice of new boomer renters “now has less of a desire to own two cars and maintain a large house and property,” Feldman adds.
Given the less-than-robust appreciation in home prices, many boomers who sell the family home are not inclined to sink money in another home purchase.
“It will be difficult for homes to appreciate in the short run,” notes Jeffrey Christakos, a Westfield financial planner whose boomer clients often choose renting as the most prudent financial strategy.
But boomers who downsize and rent are not necessarily downgrading their lifestyles.
Many apartment experts concur that those who choose to rent, and are not forced to do so because they could no longer afford home ownership, typically seek out a rental with luxurious amenities.
“They typically want spacious, well-appointed kitchens with granite or quartz countertops, modern cabinetry and stainless steel appliances,” observes Philip Martin, head of research at Waterton, a Chicago property management and investment company.
“They tend to gravitate to communities that offer a similar level of finishes to what they had in their previous home,” Martin adds.
Many boomers can satisfy their desire for new, high-end amenities thanks to a building boom in multi-family, apartment construction.
According to Axiometrics Inc., 263,470 new units rental units were completed in 2015 and 306,124 have been identified for delivery in 2016, making these two years the biggest for multi-family construction since before the recession began last decade.
While Axiometrics doesn’t have hard data on building geared specifically geared to boomers, anecdotal evidence suggests that some developers are changing up unit mixes based on the surge in boomer rentals, putting in more two-bedroom and fewer one-bedrooms than originally planned, says Stephanie McCleskey, vice president of the apartment research firm.
“We may start to see multifamily owners allow renters to pay a premium for upgrades such as custom color palettes, high-end fixtures and hardware, and top-of-the line appliances, similar to the process they might go through when buying a newly constructed home,” says Waterton’s Martin.
Overall, about one-half of renters live in single-family homes or condominium units, despite the popular perception that “renting” equates with an apartment in a large building or complex.
Many boomers will gravitate toward rentals that allow them to escape all maintenance, predicts a recent Axiometrics report.
Like younger renters, boomers search for their apartments online, says Dean Holmes of Madison Apartment Group.
But Internet search sites like Apartments.com and Zillow.com are more popular with this age group than social media channels such as Facebook, Holmes says.
Boomers “take longer to decide on where to rent, but when they do, they seem to stay longer,” observes Holmes.
Despite the bump in new construction, rental supply is still tight in most markets, resulting in relatively expensive rental rates, notes Steve Rappin of Evergreen Real Estate Services, Chicago.
Given a wish list of newer finishes, walkable neighborhoods, Wi-Fi and other amenities that renters of all ages vye for, boomers on a budget must make compromises, concludes Rappin.
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