Renewing a residential tenancy lease instead of moving to a new home can mean major savings for renters in the United States, new research shows.
Those who moved in the past year paid an average of $3,946 or $329 per month more in 2015 on rent than renters who stayed in the same property for the past five or more years, according to an analysis of official rental data from real estate firm Zillow.
More than half of renters who are planning to move in the next three years are looking for another rental, the research found and renters in San Jose, Boston and San Francisco had the most financial incentive to stay in the same property instead of moving each year, saving close to $9,000 annually on rental payments.
While rents increased across the country, market rate rents, that is those that are advertised for new renters, increased more than rents did for tenants who renewed leases. The annual market rate increase in rent from 2014 to 2015 was 5.6% compared to a 3.6% increase for renewed leases.
It is said that the US faces a rental affordability crisis, as rents have skyrocketed in recent years, while incomes have remained largely flat. Zillow’s research shows that when rents are rising rapidly, renters can save a good chunk of money by renewing a lease, rather than
moving and starting a new one.
The Zillow report suggests that renters can use these savings for a down payment, which most renters say is the greatest barrier to buying a home.
There are 43 million renter households across the country, about four million more than there were five years ago. The majority of recent household formation happened on the renter side instead of the homeowner side, in part due to millennials reaching the age to move out but not having enough savings to buy a home. Young adults are also renting longer than ever before buying.
‘Renters have a decision to make almost every year, do they stay in the same place, or should they look for a new unit? With the country in the middle of an affordability crisis, it’s important for renters to understand how much they can save if they renew their lease instead of finding a new rental,’ said Zillow chief economist Svenja Gudell.
‘Nationally, rental rates have slowed and the savings from renewing are not as significant for renters today. However, in some of the hottest rental markets, where rents are still rising aggressively, continually renewing a lease can mean saving thousands of dollars,’ she added.
In Boston in particular, it paid off for renters to stay in the same place instead of moving every year. Boston renters saved up to 86% by staying in the same rental for five or more years, which translated to $8,979 in annual rent payments. They also faced the biggest difference between annual market rate rent increases at 10.5% and rent increases for renewing at 4.3%.
Renters in Las Vegas had the smallest financial incentive to stay in the same unit. Renters who have lived in the same unit for five or more years paid on average $842 less per year than renters who moved the year before.