Most people tend to think of renters as young professionals who are just getting started. For many years, that may have been the case--but the demographic of renters has drastically changed since the Great Recession. Today, demand for rental housing is on the rise among people of all ages, incomes, and demographics.
There's one group in particular that stands out: Renters ages 55 and above.
According to the National Association of Home Builders (NAHB), builder confidence in the 55+ renter segment continues to hover around all-time highs.
The NAHB uses four indices to track production and demand for 55+ multifamily rentals. All four of these indices have been posting gains as of late. (Scores above 50 indicate that builders have a positive outlook toward that market segment.) Present production rose three points to 53; expected production climbed eight points to 52; present demand for existing multifamily units increased two points to 66; and demand expected over the next six months rose five points to 67.
And it's no wonder why: Harvard University's Joint Center for Housing Studies (JCHS) found that between 2005 and 2016, households ages 55 and over accounted for 44% of renter household growth. The share of renters in this age group increased to 27% during that same period, up from just 22% in 2005.
55+ Renters: What's Driving the Market?
Experts say that the shift is, at least in part, a result of the long-term decline in homeownership caused by the Great Recession. JCHS estimates suggest that foreclosures likely explain most of the decline in homeownership among middle-aged and older adults. To illustrate this point: Between 2005 and 2015, the homeownership rate among 46- to 55-year-olds dropped more than 6% percent; it was down nearly as much among 56- to 65-year-olds.
NAHB cites rising home prices as another driver of the 55+ rental market. Now that their children have moved out or gone to college, older Americans are taking advantage of the sellers' market to cash in on their family homes. They want to downsize, but a lack of inventory has pushed many into apartment communities. (For more on these housing market trends, check out What to Watch in 2018: 7 Predictions for the Housing Market & Property Management Industry.)
There's No Single Profile for 55+ Renters
What do 55+ renters want? Studies show that the 55+ renter segment is actually quite diverse. Some want to live in urban centers where it's easy to walk to restaurants, shops, and medical facilities. Others prefer to age in place--not necessarily in their current home, but rather, in the community where they've grown roots.
"It's a lifestyle choice," says Branden Wermers, Director of Development for San Diego-based Wermers Companies. "They want to have the flexibility to move. Sometimes their kids are moving and they want to rent a place where the kids are living, but they don't want to buy there, because the kids could move again." Being close to grandchildren is also a consideration for many.
NAHB did find some trends among the 55+ renter cohort, however. For example, most 55+ renters want to live in low-maintenance, single-story units in low-crime areas. Baby Boomers are also placing a greater emphasis on properties that allow them to be active and social; so apartment buildings with fitness centers, outdoor areas, and shared event spaces are in high demand.
Where Housing is Needed Most for 55+ Renters
It should come as no surprise that housing for 55+ renters is going to be needed most in areas with an aging population, like the Northeast and parts of the Midwest. For example, older households are driving new tenant demand in both Detroit and Columbus, Ohio--areas that otherwise have a declining population, but where the number of older adults remains high. Research suggests seniors will make up a bulk of rental growth in Indianapolis, Kansas City, Louisville, Memphis, Milwaukee, and Sioux Falls between now and 2030, as well.
Meanwhile, states like California and Florida benefit from high rates of international immigration which, on the whole, drives the median age downward. California's robust economy also attracts young, talented workers from across the world. As a result, demand for rental housing among age groups is projected to be more balanced in cities like San Francisco, San Diego, San Jose, and Los Angeles.
The Appeal of 55+ Renters
Aging renters are a particularly appealing demographic because, at the younger side of the spectrum (ages 55 to 65), they have more disposable income to spend than young adults and families. As a result, they tend to be willing to spend more on rental housing, particularly in well-located communities that offer robust amenities.
Incomes tend to become more constrained as older adults retire and move into the other end of the spectrum (ages 65+). However, income lost in the form of wages is often supplemented by retirement benefits, Social Security, and pensions. As Boomers reach age 75, there's an expectation that they'll need senior rental housing that provides a continuum of care, such as home health aides and other on-site medical services.
So, why does all of this matter for landlords, property managers, and homeowners associations? We aren't just throwing data at you; instead, we hope you'll use this information to capitalize on shifting demographic changes.
If you're located in market that's experiencing an uptick in 55+ renters, consider making property improvements tailored to senior residents.
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