How did the rental market change, 2010-19?
One of the biggest changes, per data, is more renters in two categories: (1) is over $150,000 per year in income -- a group that would traditionally be owners -- and (2) is renters over the age of 60 (again, traditionally owners). There are currently 108.5 million renters in America, and the number of high-income renters doubled in 46 U.S. markets, including DFW. In fact, look at the No. 1 city, 2010-2018, for increase in high-income renters:
Arlington actually saw renters making $150,000+ quadruple in the last decade. And in Dallas, the number of over-60 renters rose 56% this past decade; in Fort Worth, the number rose 67%.
So what’s driving this?
One easy answer is “more luxury apartments.” That’s a small part of the equation, yes.
You might think another answer is “People want to be closer to urban cores.” That’s actually not as big a factor, per RentCafe data: 40 of the 50 biggest cities in the U.S. -- including Dallas, Fort Worth, and Arlington -- saw suburban rental apartments grow at a faster clip than urban core rental apartments.
And you might think it’s solely a money issue, as many things are. But that is a little skewed too: rents went up 36% this decade, but median home prices only went up 27%. Wouldn’t homes be a better investment, potentially?
Well, no. Homes are a lot of money and apartments are not, necessarily. Incomes only went up about 20% this past decade -- below both apartments and home purchases -- and in reality, wages for most Americans have been stagnant since about 1983. Texas is sometimes considered a “miracle economy” by some, but wage growth hasn’t been massive in DFW either.
So, broadly speaking, people have less money relative to the cost of goods and services. We know fiscal literacy isn’t that high in the U.S., and it’s easier to budget around a rent payment as opposed to a mortgage payment, generally.
The other factor is Boomers. We touched on this in our blog about the debt crisis, but consider some fake math for a second. Let’s say a Boomer bought a house 20 years ago for $180,000. Now they can sell it for $700,000. Awesome. But can they afford to get back into that $700,000 neighborhood immediately after the sale? Probably not. Their only entry point into that neighborhood, assuming they make the sale and don’t “age in place,” is probably to rent a new luxury apartment that has been developed adjacent to that hood in the last 5-10 years. That’s driving the uptick in renting for older/more established people as well.
You can see why development has escalated around DFW if you look at these trend lines too. As renters have increased, 2010-19 (and perhaps beyond) is “The Era of Multifamily” in some respects.
PS: if you ever want to sound “woke” at a cocktail party discussing wage stagnation, read this and talk about “firm-size wage effect.” Basically the idea is that your grandmother was wrong. Wait, what? Well, remember how your grandmother always told you to go get a good job with a big firm? Right, of course. They can pay better and take care of you, right? Turns out that’s not actually true and big, established firms have a bigger tendency than most to keep down salaries. That’s why you’re actually seeing some of the tech startups in DFW -- we own the dating app startup world! -- offer solid salaries, but go for younger employees, who tend to still be renters as well.
All-in, it’s the Decade of the Renter, almost regardless of age.