Source: This article was published with permission from Home Union
Property owners have been renting out homes for centuries since apartments were still curiosities and could be found only in the biggest cities. However, in recent generations apartments have become the category leader and rental homes, though there are about 14 million today, which are mostly an afterthought.
As a result, until recently, not much was known about renters who choose single-family homes today and why. All that changed when the flood of foreclosures that began in 2007 added more than a million rental homes to the nation’s rental inventory and turned single-family homes into the fastest growing rental category. Some 52 percent of all rental units in the U.S. are single-family homes, housing 27 percent of all renters. From the peak of the housing boom in 2005 until 2010, single-family rentals grew at 21 percent versus just a 4 percent increase in total housing units, according to Census Bureau data. Single-family homes now comprise 35% of all rentals and 11% of all households.
With single-family homes available in record numbers and plentiful in markets where they once were scarce, the SFR option is creating a distinctive housing lifestyle. It appeals to a growing demographic of households that want a family-oriented lifestyle but lacks the means to buy a home as costs escalate and financing the purchase becomes more difficult.
A recent survey by Opinion Research Corporation International provides insight into some of the reasons that so many of today’s tenants pick single-family rentals over homeownership or living in an apartment.
Single-Family Rentals are for Families, Apartments are for Singles
Single-family households are larger; some 65 percent have three or more members compared to 32 percent of apartment households. 63 percent of single-family households include children; only 34 percent of apartment renters have children living with them.
With more interior living space, outdoor space and the amenities of neighborhood living, single-family rentals were built for families. Many are located close to schools and recreation rather than the restaurants and bars that appeal to apartment dwellers. Compared to apartment dwellers, single-family renters value neighborhood features important to children, such as parks and playgrounds, good schools and safe neighborhoods.
Single Family Renters are Wealthier
Single-family renters make more money, which makes sense since SFRs are generally larger and rent at a premium compared to apartments. Median income for a single-family renter is $75,000-$100,000 versus $50,000-$75,000 for a multifamily tenant.
Single Family Renters are Older
Most single-family tenants are older; ages 35-44, compared to apartment dwellers who are either in their twenties or early thirties.
Single Family Renters Stay Longer
Single-family home tenants are more likely than apartment tenants to stay in their current homes five years or longer, suggesting that management is easier and that demand for single-family homes will be more stable than multifamily. One out of four single-family tenants plans to stay in place five years or more, compared to one out of five apartment dwellers.
Single Family Renters Rate Property Management Higher than Apartment Dwellers
One factor contributing to SFR stability
is the high marks that SFR renters give the quality of single-family property management. Some 84 percent of tenants in single-family rentals said their property management was good or exceptional, compared to 69 percent of apartment renters. One out of four apartment dwellers rated their management as only adequate.
Rental Lifestyle Keeps Renters from Homeownership
Despite reports that the difficulties of getting financing are keeping many renters from becoming homeowners, the survey found that the inability to get a mortgage ranks only third among apartment dwellers and single-family renters don’t plan to become homeowners. More renters report that they don’t want to buy a home because they enjoy renting or they simply don’t want to be homeowners.
Stability, maturity, family, higher income, self-sufficiency—these are key differences between the tenant populations of single-family rentals and apartments, differences that translate into fewer management headaches, lower management costs and a better environment for real estate investors.