The seventh annual Rent.com Property Owner and Manager Market Report captures trends in the rental market directly from apartment property managers nationwide.
In the 2015 survey, more than 500 property managers in the U.S., representing thousands of rental properties, and hundreds of thousands of rental units, provided insight on the current and predicted demand for rentals, expected rental rate increases, how property managers are working to retain residents, and the changing demographic profile of American renters.
Rental Inventory Near 20 Year Low
This is the lowest that vacancy rates have been in almost 20 years! According to the U.S. Census, national vacancy rates in the second quarter of 2015 were 6.8% for rental housing, down nearly a full percentage point (from 7.5%) from the same time in 2014. The last time vacancy rates dipped below 6.8% was the fourth quarter of 1985 (6.7%).
Since Rent.com’s first Property Owner and Manager Report in 2009, property managers have reported a steady decrease in vacancy rates, and 2015 is no different. This year, more than 46% of property managers surveyed reported a decrease in rental vacancies.
According to Census data, vacancy rates for rental dwellings have fallen steadily since they hit a high of 11.1% in the third quarter of 2009, at the height of the U.S. housing bubble burst.
Fewer Vacancies Leave No Room for Negotiation
As the rental market continues to become more saturated, property managers are having to do even less in order to fill apartment openings.
In 2015, 55% of property managers said that they are less likely to offer concessions or lower rents in order to fill vacancies than they have been in years past. In fact, 64% reported that they are not doing anything different from one year ago, in order to fill vacancies.
With multiple applicants vying for the same apartments, more than half of the property managers surveyed (54%), noted that it is taking roughly the same amount of time to convert leases, while 33% stated that it is taking even less time, compared to last year.
It’s Less About the Renter, and More About the Benjamins
Despite the fact that property managers currently have the upper hand in the leasing process, 56% reported that the increased demand has not made them become more selective about potential renters.
In fact, only 17% reported that they have become more selective about who they rent their apartments to, regardless of increased demand and limited inventory. Higher credit scores, higher income-to-rent ratio and excellent rental history rank amongst the top requirements from property managers.
What do they care about when it comes to who is leasing their apartments? Money. While they might not be more selective in their screening process, property managers still care about getting top dollar for their properties. In fact, 53% of property managers said that they were more likely to bring in a new tenant at a higher rate, than negotiate and renew a lease with a current tenant that they already know.
Expect Rates to Rise by 8% in 2016
An overwhelming 88% of property managers raised their rent in the last 12 months, and there does not appear to be any signs of stopping.
68% of property managers predict that rental rates will continue to rise in the next year by an average of 8%! This is a two percent increase over the estimated 6% rent hike predicted by property managers back in 2014.
Unsurprisingly, increased demand and low inventory were the primary reasons for increasing rental rates over the last year, according to 64% of property managers surveyed. Property maintenance costs and remodeling fees were also cited as primary drivers of rental increases (44%).
Renters are Struggling to Make it on Their Own
As a result of skyrocketing rental rates, 43% of property managers reported seeing an increase in the number of applicants who do not meet the income requirements on their own and require a guarantor.
Millennials Deferring Home Ownership and Opting to Rent
Millennials face limited job availability, lower incomes and high student loan debts, making it more affordable and flexible to rent. In fact, 45% of property managers have noticed an increase in the number of millennial renters.
Homeowners are Trading in Mortgages for Leases
More than half of all property managers surveyed (54%) reported seeing an increase in the number of former homeowners seeking rental apartments, thus adding to the already crowded rental space.
This is an increase from 2014, where only 50% of property managers reported seeing this same trend.
Existing Renters Not Giving Up Their Leases
Renters also appear to be staying in their apartments longer, adding to this supply/demand imbalance!
According to property managers, 34% reported that renters are holding on tight to their apartments and renewing their leases (up from 29% in 2014), rather than trying their luck elsewhere.
Methodology: The survey was conducted among more than 500 of Rent.com’s property management customers, representing thousands of rental properties, and hundreds of thousands of rental units.