- For millennials, economic circumstance and personal preference have conspired to drastically change the concept of the American Dream.
- Renting affords a level of freedom and flexibility that young people have come to prioritize as they take time making life’s big decisions.
- Climbing demand for rental units is plain to see in the rocketing apartment prices in major cities.
I’m 31. I have a great job. I have a savings account and patio furniture and a dog.
And — I’m not embarrassed to say it — I’m a renter…and just might be for life.
Nor am I alone — not by a long shot.
My generation — yes, the millennials — is leading the trend.
In the span of a decade, the American Dream of homeownership has lost a good deal of its luster. In its place, renting, long considered a stopgap solution, is quietly emerging as the new American choice.
Working in the real estate tech sector (I co-founded a company that helps landlords market and lease apartments), I’ve had a unique perspective on the transformation.
Here’s a view from the frontlines — as a real estate professional and a millennial — on the opportunities, and challenges, that lie ahead as we become a nation of renters.
The paradigm shift
For millennials, economic circumstance and personal preference have conspired to drastically change the concept of the American Dream. The recession of 2008, which saw so many homeowners lose equity in their homes, took some of the shine off of real estate as an investment.
After witnessing the personal and political chaos of the subprime mortgage crisis, many millennials are wary of taking on a lot of debt.
In fact, people under 35 shed more personal debt than any other generation during and after the economic meltdown, according to the Pew Research Center — mostly by eschewing large purchases like homes and cars.
Since then, millennials have continued to sidestep big investments, especially in major cities where housing prices are increasing out of step with local incomes. That’s certainly the case in New York, where I live.
But even if I became a millionaire overnight, I’m still not sure buying a place would shoot to the top of my to-do list. Why? Renting gives me something I value more than ownership: choice.
What millennials want
Renting affords a level of freedom and flexibility that young people have come to prioritize as they take time making life’s big decisions. Data from U.S. Census Bureau reflects these shifting values.
Nearly three-quarters of 30-year-olds had kids and were married in 1975, while more than half owned a home.
Today, less than a third of 30-year-olds have hit those markers. In key respects, millennials don’t want to be tied down. The world is big, the possibilities are endless and there’s no haste to be burdened with property taxes and broken appliances.
Of course, part of this has to do with the financial realities millennials are facing.
Saddled with student loans and greater insecurity in the job market, fewer young people have the disposable income necessary to put toward a mortgage or a down payment. But the forces that have given rise to renting, not to mention Uber, Airbnb and other iterations of the sharing economy, aren’t entirely economic.
The move towards “NOwnership” is also motivated by a desire to minimize environmental footprint and avoid being bogged down by an abundance of stuff we might want to use, but certainly don’t need to own. Renting fits squarely into this generational ethos.
The industry plays catch-up
This sea change has big implications for the rental housing industry.
Climbing demand for rental units is plain to see in the rocketing apartment prices in major cities. And the quest to meet this demand has triggered a frenzy of rental housing construction.
According to Freddie Mac, last year was a banner one for multifamily building, which hit the highest rate since 1989. In fact, multifamily housing now accounts for more than one-third of all new housing, with investment in the sector hitting a record $43 billion in the fourth quarter of 2015.
The nature of apartment units has changed, as well. Unlike a generation ago when apartments were shoebox stopgaps for singletons, today’s rental complexes are state-of-the-art communities meant for a longer stay.
Whether it’s bike storage areas, community gardens, movie theaters or even larger units to lure families with kids, developers are upping their game to appeal to a diverse and demanding market.
Staying in the game
Faced with competition from new housing developments, managers and landlords of older properties are leveling up, as well, to stay in the game and court renters.
Traditionally resistant to innovation, landlords are now asking for better data to keep tabs on what’s happening in the markets around them, while realizing they need to modernize their marketing and advertising efforts.
Millennials, used to the instant gratification of the digital age, expect accurate information on listings available in real time, for instance. Showing up to a viewing to find your dream apartment has been off the market for hours, or even days, is no longer acceptable.
For real estate technology insiders like me, this is where things get really interesting.
Tech companies have a natural role to play as it becomes more important — and challenging — than ever to pair the right renter with the right home at the right time. For renters in hot markets, for example, we offer verified listings, apartments that are guaranteed to be available.
As the face of renting changes, the industry has been forced to evolve. Demand for units — and the quest to attract millennial renters — has introduced new technology into the equation.
As more people look to renting as a long-term life choice, the process itself is becoming more human and more flexible. In a world where technology is transforming how we live and work — and even testing the logic of “ownership” — renting might just be the most future-proof option of all.
Caren Maio is founder and CEO of Nestio, a residential leasing and marketing platform.