Updated December 28, 2020
7 Rental Market Trends to Know for 2020 Revisited
7 Rental Market Trends to Know for 2020 (Revisited in December 2020)
Today's landlords and property owners currently face a clash between rising rental demand, changing regulations, declining profits, and a shortage of affordable homes. Many factors will influence the future of real estate and the rental market in the new year. Learn about the top rental market trends for 2020 and how you can stay ahead of the curve.
1. The "Typical Renter" is changing
Historically, renting was a rite of passage and the first step you would take before venturing into homeownership. Renters used to be predominantly from younger generations.
Now, it's a lifestyle choice for any age. Studies show nearly one in two renters would prefer to own homes but aren't in the position to buy.
Tactics for attracting and keeping renters must fit a broader demographic in 2020. Whether you target young professionals, families, or retirees, make sure to offer rent prices for all income levels.
***Revisiting trends in July 2020: 33% of renters are between 30-44, 30% are between 45-64, and 15% are 65 or older.***
***Taking a second look at the rental market trends for year-end as of December 15, 2020, according to RentCafe's analysis of 5.8 rental applications, give insight into how the Pandemic has affected renting. Overall renting activity is 10% less than last year at this time.***
2. Shifting focus to Gen Z
When talking about the future of renting, it's impossible to ignore the growing Gen Z cohort. Unlike past generations, Gen Z has never lived without technology, so leasing and marketing efforts should somehow incorporate technology.
Gen Z is highly active on apps and the internet, which both serve as excellent platforms for marketing efforts. This upcoming generation also places importance on trust, equality, and a more laid-back approach to communication.
To ensure you're successfully reaching Gen Z prospects, shed the formal language, and opt for more casual messaging through technology.
***With only 22% of renters under the age of 30, listings still need to be a mix of formal and informal messaging.***
***The RentCafe report found that with the current rental market trend Gen Z has now surpassed the Gen X renter population by 4%. They have almost passed both Gen X and Boomer generation, at only 6% less than both groups of renters. Millennials still hold the highest percentage of renters at 47%.***
3. Technology use continues to grow
Technology is part of nearly every facet of the modern world, and the rental industry is no different. Technological amenities will continue to expand in 2020.
Within the next year, there will be tech solutions for nearly every aspect of property management. You should view these amenities as a revenue builder and offer them free or subscription service for tenants.
Some top actions made easier by technology will be landlord communication, online rental payments, climate control, security, and social communities. Also, renters will be requesting even more tech amenities, including free Wi-Fi, keyless door entry, outdoor fireplaces and heaters, and high-tech fitness centers.
***With COVID-19 and more people working from home, businesses have helped breakthrough any lack of technology to get their employees set-up for remote work.***
***There has been a value add uptick in smart-home technology among some larger multifamily property owners. Prospective tenants have forced a demand for virtual tours instead of seeing a property in-person. With many stay-at-home orders issued by local governments, virtual tours have allowed people to see the property. Safe and secure package storage has become a bonus for multifamily tenants. Knowing they can purchase online and have it delivered without being stolen has been a value add. Some rental communities have paid for online classes so tenants can stream fitness, art, cooking, and other classes.***
4. More rental incentives
The rental market rend is the move for rental incentives to shift to more digital rewards rather than rental discounts in 2020. Online rewards like e-gift cards, offering online rent payment options, or installing updated appliances are all attractive incentives.
***With many being unemployed, rental incentives have been geared toward helping people pay rent and not on extra luxuries.***
***Touchless amenities have been a rental incentive in larger rental complexes.***
5. Rent control to have a bigger impact
States like New York and California enacted new rent control legislation earlier this year, with more regulations in the pipeline for other states. This legislation aimed to alleviate increasing rental costs and calm industry unease.
The New York metro area saw a 9.2% year-over-year decline in multifamily investment within the first eight months of 2019 due to the new regulations. In 2020, rent control will likely bring more debate between the housing and rental industries.
***Rent control talks are in full swing all over the U.S. The landscape is even tricker and more unstable than before the Pandemic shut down the country. ***
***With eviction moratoriums, the cancel rent movement, and high vacancy rates in low-income areas, rent controls have not been solidified. In the largest areas, the biggest concern concerning rent control is whether or not government aid for renters will be paid.***
6. Rent growth to slow and stabilize
In 2020, experts expect rent growth to slow and stabilize at a sustainable pace as wage growth and inflation level out. Since June of 2019, annual rent appreciation has been on the rise at around 2.3%.
Industry analysts predict the uptick in rental growth will continue at the start of 2020 and eventually taper off in the spring. Low mortgage interest rates should help keep rent growth from increasing too much, encouraging more people to rent.
***Rent growth has collapsed in many areas. With 2020 being one of the hardest-hit for decline after years of growth.***
***Overall rental applications have declined 10% in 2020 based on the RentCafe data. At Rentometer, the data has shown that the largest metro areas have taken a big hit based on year-over-year rental averages.***
7. Investor clients will outweigh accidental landlords
Accidental landlords will continue to exit the rental market in 2020. In their place, intentional investors will make up the majority of property managers' client base.
Property managers must prove their value to new groups of DIY landlords managing their rentals through apps. Make sure to tweak your services to fit your clients' needs, and 2020 will prove to be a fruitful year for your properties.
***Larger investment firms are gearing up to buy out landlords who want out of the real estate industry. Only time will tell if these deals are worth it.***
***Investors are buying, but rental prices are high in most real estate markets across the United States. They are also watching any 2021 tax law changes to see how real estate will be affected.***
About the Author: Kayla Matthews is a smart home journalist and real estate writer whose work has been featured on Houzz, Dwell, Inman, and Curbed.
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