Growing share of tenants consider renting more affordable than buying a home
Renters are increasingly likely to believe their housing arrangement is more affordable than buying a home, according to a recent survey by Freddie Mac Multifamily. In addition, a growing share of older renters indicated that they have no interest in purchasing a home.
At the same time, many tenants said they have had to adjust their spending habits to pay their rent. Most respondents said they are interested in someday owning a home, even if affordability concerns are currently preventing them from doing so.
In the latest "Profile of Today's Renter" report, Freddie Mac found that 78 percent of tenants polled in August believe renting is more affordable than owning a home. This was up 11 percentage points from a similar survey in February, but only 2 points from August 2017.
This finding was consistent among all generations. Three-quarters of millennial respondents (ages 21 to 37) considered renting to be more affordable than owning, along with 70 percent of Generation Xers (ages 38 to 52) and 81 percent of baby boomers (ages 53 to 71).
Sixty-three percent of respondents said they would be motivated to buy a home if they made enough money to afford such a purchase. This influencer easily outpaced the next most cited reason, the desire to settle in one place, which was cited by 35 percent.
Most renters—63 percent—said they were satisfied with their housing arrangements. This share was down 3 points from February, but up 3 points from August 2017.
More than three-quarters of respondents expressed interest in buying a home, but said certain challenges were keeping them from doing so. Forty-one percent said renting is suitable for them now because they can't afford to buy a home, even though they want to. Twelve percent said they want to own but don't think they'll ever be able to afford it. Seventeen percent said they can afford to buy a home and will do so sometime in the future, while 7 percent said they're working toward homeownership.
Twenty-three percent of respondents said they have no interest in ever owning a home. This was up 6 points from August 2017.
Older respondents were especially likely to express disinterest in buying. Forty-two percent of baby boomer renters said they had no interest in owning a home, a year-over-year increase of 11 points. Twenty-one percent of Gen Xers felt the same, an increase of 8 points. Eight percent of millennials said they had no interest in buying a home, unchanged from the previous year.
Twenty-one percent of renters said no circumstances would motivate them to buy a home. Just 7 percent of younger millennials (ages 21 to 27) gave this response, compared to 10 percent of older millennials, 18 percent of Gen Xers, and 40 percent of baby boomers.
Two-thirds of renters said they plan to rent their next home as well, a year-over-year increase of 10 points. This included 76 percent of baby boomers (up 11 points), 64 percent of Gen Xers (up 16 points), and 54 percent of older millennials (up 8 points).
Bucking the trend, younger millennial renters expressed more interest in owning a home for their next residence. Thirty-six percent said they plan to buy, up 2 points from August 2017.
Although many renters expressed concerns about the affordability of buying a home, a majority of respondents also admitted to facing challenges in paying for their current home. Sixty-one percent agreed that changes in their rent forced them to adjust their spending on food and other essentials, a year-over-year increase of 3 points. This was particularly common among renters in rural areas (77 percent), those in the West (69 percent), and older millennials (68 percent).
Two-thirds of tenants said they have made changes in the past two years in order to afford their rent. Among those who made changes, 64 percent said they spent less on non-essential items such as entertainment, while 51 percent spent less on essential items like food or utilities. Half of these renters said they put less of their income toward savings.
"Views of renting as the more affordable option continue to drive the behavior and satisfaction of a large and growing majority of renters," said David Brickman, president of Freddie Mac and head of Freddie Mac Multifamily. "While renting is seen as more affordable, this research underscores that 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."
The survey found that renters in the "essential workforce" faced pronounced difficulties, with 88 percent saying they had made changes in the past two years to afford rent. This workforce was defined as any profession essential for the operation of a community, with fields including education, health care, public safety, and food service. By comparison, 65 percent of all other workforce renters and 61 percent of homeowners in the essential workforce said they had adjusted their spending habits.
Roughly half of essential workforce renters—48 percent—said it was difficult to find affordable housing close to their place of employment. Thirty-nine percent of homeowners in the essential workforce said the same.
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