CARROLLTON, TX—Their rents may be increasing at the fastest pace in almost a decade, yet US apartment renters continue to prefer to renew their leases rather than move elsewhere. “For all the noise about affordability, there isn’t yet any real evidence that market-rate apartment renters are unable or unwilling to renew their leases,” says Jay Parsons, director of analytics for Carrollton, TX-basedMPF Research.
That being the case, a new study from the National Multifamily Housing Council finds that renters bring heightened expectations to the table when they sign those leases. “There have been 1.6 million new renter households created in the past five years,” says Rick Haughey, VP of industry technology initiatives with NMHC in Washington, DC. “Many of these new residents are making a lifestyle choice to rent instead of buy and are thus looking for personalized services and amenities. The apartment industry is stepping up to provide those experiences.”
A prime element of the rental lifestyle is location, specifically walkability. A majority of renters would rather walk than drive to the grocery store, public transit and local restaurants and bars, and this preference influences their decision of where to rent. Conversely, most would prefer to drive to work or to school.
Another all-important factor is connectivity, especially since 91% of respondents to the NMHC/Kingsley Associates 2015 Apartment Residence Preferences Study said they rely entirely on mobile phones, and more than half tested connectivity while being shown around their would-be apartment units. While 98% of respondents said good reception is important, only 68% claimed to actually have it at their apartment communities.
Other priorities identified as important included amenities for pets, on-site fitness facilities, package delivery—along with free package lockers—and electronic options for paying the monthly rent. The survey was conducted among nearly 120,000 respondents. “With Harvard’s Joint Center for Housing Studies projecting upwards of four million new renters during the next decade, we expect the race for new amenities–and the demand for them–will only grow,” says Kingsley principal John Falco.
Amenities or no, 52.2% of all expiring leases in October were renewed, according to an MPF Research analysis of lease transaction data from parent company RealPage Inc. The renewal rate was up 0.2 percentage points from the year-ago period, thereby continuing a 29-month trend of year-over-year increases in retention rates.
This was the case even though the renewals came with rent increases that averaged 5.2% per month nationwide. MPF says this was the largest rent increase for renewals in nearly 10 years.
If rent increases are up compared to years past, then so are renewal rates. More than 50% of renters with expiring leases have renewed in each of the past 22 months. Prior to 2010, the renewal rate was typically in the mid- to upper 40% range.
While retention rates are highest in the more mature markets of the Northeast and Midwest, conversely the markets with the steepest rent increases for renewals tend to be cities where new-lease rent growth is also high. That means markets in the Bay Area and the Pacific Northwest, which comprised the top five spots for renewal rent increases, followed by Denver and four late-recovery cities: Sacramento, Atlanta, Las Vegas and Phoenix.