Apartment Renters Renew Despite Rising Rents

More than half of apartment renters whose leases expired in August signed another lease rather than move out, continuing a trend of year-over-year retention-rate increases, reported MPF Research, Carrollton, Texas.   

And leases renewed in August included a 5.4 percent average increase in monthly rent–the largest rent increase for lease renewals in nearly 10 years–said MPF Research Director of Analytics Jay Parsons. More than 50 percent of renters in market-rate housing with expiring leases have renewed in each of the past 20 months, MPF Research said. Prior to 2010, that share rarely reached 50 percent and typically hovered in the mid- to upper- 40s. Over that time, lease-renewal rent increases averaged 4.6 percent, marginally higher than the mid-2000s norms.  

“Renters are increasingly choosing to stay put and renew their leases in spite of rapidly rising rents and historically large levels of new supply, which logic would suggest would be driving down retention,” Parsons said. “The fact that retention is still so strong speaks to the depth of demand for apartments and to the absence of any sort of affordability crisis in conventional, investment-grade apartments.”  

Parsons said a separate MPF Research study found that the average household in a conventional, non-designated low-income apartment unit spends less than 20 percent of its income on rent. Very few low-income households live in conventional apartments, MPF said.  

“There is a true affordability crisis occurring for low-income households, and that has been well-documented,” Parsons said. “There simply isn’t enough affordable housing in this country. The affordability conversation needs to be steered here, rather than on conventional apartments.” 

While national results are strong, regional results varied. The Northeast and Midwest tended to see higher retention rates than the South and West. But every region logged retention rates above 50 percent last month, Parsons said. Not surprisingly, the Northeast and Midwest claimed most of the major U.S. metro areas with the highest apartment retention rates in August. Conversely, lower retention or higher turnover occurred in South and West region metros.  

“These are generally younger markets with stronger job growth of late,” Parsons said. “And younger population plus more job growth tends to equal more mobility, which in turn means higher turnover or lower retention.”