WASHINGTON – Oct. 19, 2018 – Research released by Freddie Mac Multifamily finds that a large and growing segment of renters continue to believe renting is a more affordable option than owning, even as many of those same renters are feeling the squeeze of rising housing costs. All generations of renters continue to perceive renting as the more affordable housing choice and remain satisfied with their current situation.
According to the survey, 78 percent of renters believe renting is more affordable than owning – up 11 points from just six months ago, in February 2018 – even as the majority of renters (66 percent) reported difficulty affording their rent at some point over the past two years. The survey found nearly 9 in 10 renters employed in the essential workforce, such as healthcare and education, had significant difficulty affording the rent over the past two years.
Views of renting as the more affordable option continue to drive the behavior and satisfaction of a large and growing majority of renters, says David Brickman, president of Freddie Mac and Head of Multifamily. While renting is seen as more affordable, renters are feeling the effects of the rising cost of housing, driven in part by lack of supply, increased demand and the cost of construction.
Affordability of renting
Perceptions of affordability over owning increased by 11 points to 78 percent among all renters, and the survey found a rise in all subgroups of buyers. Millennials (up 14 points to 75 percent), Generation Xers (up 11 points to 70 percent) and baby boomers (up 8 points to 81 percent) all saw marked increases in the perception that renting is more affordable than owning.
Rising cost of renting
The survey also indicates that a significant number of renters (66 percent) had trouble affording their monthly rent in the last two years – significantly more than the 43 percent of homeowners who experienced similar difficulties. More than half of renters say these changes affected spending on food, utilities and other essentials (51 percent), as well as savings (50 percent) and nonessential items (64 percent).
For renters in rural areas, the impacts were particularly stark: 77 percent spent less on essential items versus 59 percent in urban and suburban areas. While a majority of renters across generations reported difficulties, older millennials (aged 28-37) reported the greatest hardship, with 79 percent reporting trouble affording rent over the past two years.
Of renters employed in the essential workforce, such as the healthcare and education sectors, 88 percent reporting hardship affording rent over the past two years compared with 65 percent of all other workforce renters and 61 percent of homeowners in the essential workforce. Approximately half (48 percent) of renters working in essential jobs believe it is difficult to find housing that is affordable close to where they work, compared to 39 percent of homeowners in the essential workforce.
“The struggles experienced by renters in the essential workforce are particularly sobering,” according to Deborah Jenkins, senior vice president of Freddie Mac Multifamily. “Nearly 9 in 10 renters experienced some hardship in affording their rent in the last two years. Numbers like these underscore the need for us to remain focused on the important role we play in financing workforce housing across the United States, with programs such as our Mezzanine Loan and Social Impact offerings.”
A consistent number of renters (63 percent) continue to express satisfaction with their rental experience. In fact, 58 percent of renters believe that renting is a good choice for them now and do not have plans to buy a home at this time, up from 54 percent in February.
Over the last three years, there has been a gradual increase in the number of renters not interested in buying. This quarter shows a small increase in this trend, with 23 percent of renters reporting they have no interest in buying a home, up from 20 percent in February. In addition, 42 percent of baby boomers have expressed no interest in owning a home.
A total of 66 percent of renters plan to continue renting for their next residence, up 11 points from February. Consistent with this view, fewer renters (41 percent) believe buying a home will be equally or more affordable in the next 12 months down from 46 percent in February.
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