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21 American cities where renting trumps owning

March 01
23:16 2017

1SAN FRANCISCO: You might take for granted that cities are renter hubs while more rural areas are where the homeowners reside. Considering cities’ limited space and transient career-chasers not looking for the long-term commitment of a home, that’s a fair guess. Yet, of more than 400 urbanized areas around the country with a population greater than 100,000, just 21 are composed of at least 50% renters, according to data from the U.S. Census’ 2015 American Community Survey.

And that number appears to be poised to grow, says an Abodo press release. As the Pew Research Center reports, the number of homeowners swapping deeds for leases continues to increase, with 3 million making the switch in 2011, compared with 2.5 million in 2001.

Taking a look back at the 2012 ACS data, we can see evidence of the trend toward renting. In 2012, there were just 14 predominantly renter cities. In 2013, there were 18. The current number of 21 has been holding steady for two years, and six cities are currently barely missing the majority-renter cut, with more than 49% of the population renting. Among them, Durham, NC; Lubbock, TX; and San Diego, CA, seem most likely to move into renter-majority status, with renter numbers rising each year. Some cities, however, are on the downslide. Macon, GA, for example, just dipped below 50% renters for the first time in years in 2015. Fresno, CA; Las Vegas, NV; and Stockton, CA, also bounce around the border a bit.
So what makes a renter-dominated city? In this study we’ll look at where the renter-majority cities are, who makes up their renter population, and what could be driving the uptick.

WHERE RENTING PREVAILS
Some of the cities on this list are no great surprise. It will raise no eyebrows, for example, that most housing units (53.9%) in the Los Angeles area are rented, not owned. The same goes for New York (50.7%) and San Francisco (50.9%) – in fact, five California cities make the list, more than any other state.

However, going down the list of the nation’s largest cities – ostensibly where the most people are trying to live – you’ll find that many are unexpectedly absent from this list. Chicago, IL; Dallas, TX; Houston, TX; Washington, D.C.; Philadelphia, PA; even Miami, FL, are still dominated by homeowners. Both Dallas and Houston are hovering around the 43% renters mark, while Miami is 41.49%; Washington, D.C. is 40.42%; Chicago is 36.1%; and Philadelphia is just 33.8% renters.

Instead, at the very top of our list, with nearly 60%, is the unassuming city of College Station, TX. Not far behind is Athens-Clarke County, GA, with 57.5%, and Killeen, TX, with 56.0%. Other somewhat surprising, not oft-mentioned, cities include Columbus, GA (53.6%); Clarksville, TN (51.9%); Fayetteville, NC (51.2%); and Fargo, ND (50.2%).

WHO ARE THEY?
Who are these renters? A cursory glance at their ages hews to conventional wisdom. The majority of renters in our list of 21 renter-dominated cities are under 44 years old, with the highest percentage (24.29%) falling between the ages of 25 and 34.

Owners tend to be older – a whopping 77.16% of them are over 45.
But a closer look at the age breakdown reveals some interesting divisions, especially on the renting side. In renter-dominated cities, the percentages are more equally spread across age groups for renting than for home-owning. Although over 50% of renters are between ages 15 and 44, a sizeable percentage are older: 18.62% are between the ages of 45 and 54, and another 14.13% are between the ages of 55 and 64. A higher percentage of renters are 65 to 74 (8.32%) or 75-plus (6.96%) than 15 to 24 (5.9%).

Renting, clearly, is not only for the young in renter-dominated cities. It’s also not only for the single and unattached. When we examined the percentages of renters whom the ACS identified as “families” vs. “non-families,” we saw a wide range from city to city. In Salinas, CA, 76.3% of renter households were families, while in Boulder, CO, only 20.92% were.

In 11 of the 21 renter-dominated cities, over 50% of renter households were occupied by non-families. Those cities – Boulder, CO; Champaign, IL; Columbia, MO; Lafayette, IN; Tallahassee, FL; Fargo, ND; College Station, TX; Athens, GA; Eugene, OR; Santa Barbara, CA; Gainesville, FL – share a common identity: They’re all college towns, home to major public state universities. It’s unsurprising, then, that their local economies would be flooded with renters, and that the (sometimes vast) majority of renters would be young students who hadn’t yet started families.

The other 10 cities are a more mixed bag. In a few – San Francisco-Oakland, New York-Newark, and Los Angeles-Long Beach-Anaheim – extremely high housing costs go a long way to explain why families are choosing to rent. In the San Francisco-Oakland urbanized area, for example, the 2015 monthly cost for homeowners with mortgages was $2,754 – the highest in the country, and over $1,000 more than the area median rent of $1,603. And in New York-Newark and Los Angeles-Long-Beach-Anaheim, monthly homeownership costs exceeded the area median rent by $1,326 and $965, respectively.

Four more of these family-dominated renting cities are located near major military bases: Killeen,TX (Fort Hood); Clarksville, TN (Fort Campbell); Fayetteville, NC (Fort Bragg); and Columbus, GA (Fort Benning). Active military service people (and their families) receive a Basic Allowance for Housing, which they can put toward accommodations off- or on-base. Given the high mobility of military families – the U.S. Department of Defense estimates that the average child in a military family moves six to nine times during a school career – it makes sense that renting (and not owning) would be a popular option off-base.

HOW RENTER GROWTH CORRESPONDS TO HOUSING COSTS
According to our data, the three majority-renter urban areas experiencing the greatest growth in renters from 2011 to 2015 were Boulder, CO (14.68%); Savannah, GA (11.50%); and Columbus, GA (9.16%).

Boulder, home to The University of Colorado and over 37,000 undergraduate and graduate students, is an obvious rental hotspot. But it’s also a growing city, just 25 miles north of the booming Denver Metropolitan Statistical Area. According to The City of Boulder and the Colorado State Demographer’s Office, the city added over 10,000 new residents between 2010 and 2015, and over 13,000 jobs.

Savannah, GA, doesn’t support a major state university, but it is the home of four colleges: Armstrong State University, Savannah State University, South University, and Savannah College of Art and Design. It’s a historic waterfront city with high housing costs, and from 2010 its population growth mirrored Boulder’s. According to the U.S. Census, the population grew 6.9% between 2010 and 2015, adding 9,339 new residents.

Columbus, GA, is the third-largest city in Georgia, with a population of over 250,000. It’s home to Fort Benning, the largest Army base in the country, which supports (but does not necessarily house) over 120,000 active-duty military, reserves, retirees, civilian employees, and family members.

For each of these three cities, the 2011-2015 changes in homeownership costs and renting costs are often widely separated. The differences are especially noticeable in Boulder and Savannah. From 2011 to 2012, when ownership costs in Savannah increased about 10%, renting costs stayed pretty level, decreasing only .86%. Renting costs began to increase in 2013, exceeding 2011 costs at about the time that homeownership costs began to decrease below 2011 levels.

One might expect that as renter demand increases, so too would renting costs. That was definitely true for Boulder, which saw a 19.43% increase in renting cost from 2011 to 2015. One reason for this might be limited supply. Boulder sits at the base of the Rocky Mountains, and its expansion plans restrict development above elevations of 5,750 feet by limiting water and sewer service. That curtails large-scale residential development, pushing it east into an already crowded urban area.

Interestingly enough, Boulder ownership costs decreased steadily over much of this time period, and looked to continue on their downward trajectory until 2014 – precisely when renting costs also skyrocketed.

Do rising home-ownership costs affect the decision to rent? Maybe. But it’s only one factor among many. If a rental market is dominated by young professionals and college students – as is the case in Boulder – falling homeownership costs won’t affect the rental market that much. But in Savannah and Columbus, where families account for about 58% of renters, changes in the cost of homeownership might have more noticeable effects.

2Columbus, for example, experienced a 5.91% decrease in renter population from 2011 to 2012, a period of time in which rental costs decreased 1.48% and homeownership costs decreased 3.4%. The rental population rebounded sharply the next year, gaining back all the ground it lost and then some, for a percentage 3.67% greater than it had been before the downturn. In that same period of time, homeowner costs stayed approximately level, while rent increased to 1.6% above the 2011 benchmark.

It’s worth noting that the last convoy of American troops left Iraq in late 2011, and the United States Army Armor School – which includes over 7,500 soldiers – moved from Fort Knox to Fort Benning in 2011. Such an influx of residents – some new and some returning, some with families and some single, some renters and some homeowners – makes for a volatile housing dynamic. Perhaps returning service members wanted to put down roots as homeowners, and new residents, unsure of their permanent plans, felt they would rather rent. Short of an extensive study of the housing supply in Columbus, it’s hard to say just how much ownership costs affect the decision to rent or own.

CONCLUSION
Nationwide, renters are on the rise. In fact, 2015 saw 1.4 million new renter households, creating the largest percentage of renter households the nation has seen since the 1960s – 36.4%. Thanks to this rental boom, renting became the majority in 21 U.S. cities in 2015, up from just 14 three years prior.
The demographics of these 21 renter-majority cities are varied, but almost unsurprising: Some are college towns, with young, temporary residents; others are near military bases, where many residents are transient; and yet others are large cities with extremely high housing costs, making ownership less than feasible.

The U.S. housing market crash of 2007 – with accompanying home price plunge – opened the door to many to finally afford a home. But at the same time, as the Joint Center for Housing Studies at Harvard notes, the crash also revealed what a risky investment home ownership can be, which continues to contribute to the trend toward renting.

As we’ve seen in our study of housing costs in the three cities where the renting population grew the fastest between 2012 and 2015, monthly cost, is not the sole factor at play in people’s decisions to rent or own. Decreasing home-ownership costs don’t always translate to more homeowners, just as increasing rental costs don’t always limit the number of people who want to rent. However, as was the case with Boulder, Columbus, and Savannah, as more cities fill with renters and vacancy rates decline, we can expect demand to drive prices up.

India Post News Service

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