As buy-to-let owners will know, the US rental market has seen plenty of changes in the last decade. Tenant profiles have shifted and rental households have redirected their preferences for location and type of home.
A recent article in Forbes outlined the transformation of the market since the property and financial crash at the end of 2007. The conclusions offer interesting reading and shed some light on how the market may perform in the next few years.
Location preferences for the US rental market
The article examined the most popular cities for rentals over the last 15 years. While the list contained no surprises - the high-tech city of Seattle is an example - it also included some locations you may not expect.
The states of Florida and Texas dominated the rankings of the cities with the most substantial increases in rental households. Metros in the two states accounted for half the top ten.
In the case of the Sunshine State, Jacksonville, Tampa and Miami stood in 5th, 6th and 10th positions, respectively. Jacksonville and Tampa saw their rental population increase by almost a third, while Miami registered an uptick of 31%.
Percentage of rental housing rises
As well as growth in the number of homes occupied by renters, many cities also experienced an increase in the percentage of total rental housing. In this case, Tampa stood in first place, with more than half its properties occupied by tenants (50.7%), up from 44.9% in 2010.
Rental rates higher than homeownership
One of the knock-on effects of the sharp rise in US property prices over the last 18 months has been the corresponding surge in rental rates. And the Forbes article reveals that they have risen considerably more than costs for homeowners.
US Census Bureau statistics show that while the average monthly rent cost US$841 in 2010, it had risen to US$1,096 in 2020. This increase of 30.3% far exceeds the change in costs for homeowners, calculated to be just 1.4%.
Rental rates have since soared even higher and those for May this year were the most expensive ever. With the average at US$1,849, tenants are now paying 23.3% more than in May 2020.
More high-income tenants
In tandem with the rise in rentals goes the increase in the number of tenants earning over US$100,000 a year. According to the Census Bureau, renters with an annual income between US$100,000 and US$150,000 rose by 87.8% in the decade to 2020.
The next income bracket (over US$150,000 a year) reveals an even more spectacular uptick. This tenant-household group grew by 160.9% from 2010 to 2020, indicating the new preferences within the US rental market.
However, the most significant growth in total market share was among tenants with slightly lower incomes. Renters earning US$50,000 to US$75,000 now represent the largest group and account for 17.5% of all tenants, up from 15.4% in 2010. Close behind them was the next group with an income up to US$100,000 and a 10.2% market share.
The general increase in tenant income consolidates the buy-to-let market and opens the doors for investors looking at bigger-ticket properties in key locations in the US. Build-to-rent single-family homes are therefore an interesting option.