Lack of family homes in the US rented sector is pushing up rents, says new analysis

Almost half of all tenants in the United States want to rent a single family home, but less than a third actually do, according to the latest real estate market trends report.

Part of the problem is that the supply of single family rental homes has not kept up with high demand, driving up rents, says the report from real estate firm Zillow. It also points out that at the same time an increase in multi-family units has kept rents in this type of property virtually flat.

The report also shows that nationally, median rent for houses have increased by 1.3% year on year to a monthly payment of $1,404, while the median rent for an apartment rose just 0.5% to $1,551.

Indeed, in half of the 50 largest metros it is getting more and more expensive to rent a house versus an apartment. Single family rents are rising faster than multi-family rents, with the trend most exaggerated in Portland, Oregon, New Orleans and Chicago.

In Portland, monthly rent for houses is rising at almost 4.5% annually, but monthly rent for apartments is falling. Over the past year, the median rent for Portland apartments fell just over 1% to a monthly payment of $1,536. Median rent for Chicago apartments is also falling, while rent for houses is rising just over 1% annually.

When the housing market crashed, investors scooped up many single family homes lost to foreclosure and turned them into rentals. Almost 20% of all single family homes across the country were rented in 2016, up from 13.5% in the previous 10 years.

Meanwhile, rentals are in increasingly high demand because many aspiring home owners don’t have enough money to buy a home. A 20% down payment on a typical home costs more than two-thirds of the median household income, but can cost up to 180% of the median household income in pricier housing markets like San Jose and Los Angeles.

The analysis shows that 45% of all recent renters considered renting a single family home, but just 28% actually ended up renting one. The report also found that half of all buyers with children at home consider renting instead of buying during their home search, and according to the Census Bureau, % of families with children still living at home are renters.

‘When the market crashed, many families lost homes they owned during the foreclosure crisis, and now may not be able to afford to buy another as home prices rise,’ said Zillow chief economist Svenja Gudell.

‘Those who want to buy are finding it difficult to find the right one, or may need a bit more time to come up with a down payment, but still want the advantage of space that single family residences often provide,’ she explained.

‘This, coupled with the foreclosure crisis turning millions of home owners into renters, is a big reason why demand for single family rental homes has risen over the last few years. Even though rental homes are in high demand, apartment living remains an attractive option for many young renters who want to be close to work and amenities, like restaurants and grocery stores,’ she added.

The research also shows that tenants aged 38 to 52 are significantly more likely to rent a single family home than any other home type. Just over 40% of this age group rent a single family home compared to 25% of people aged 18 to 37 and just 10% of those aged 73 and over.