Most people tend to think of renters as young professionals who are just getting started. For many years, that may have been the case. However, the demographics of renters has drastically changed since the Great Recession. Today, the demand for rental housing is on the rise among people of all ages, incomes, and across demographics.
There’s one group in particular that stands out: renters aged 55-years old and above.
And it’s no wonder why. The Joint Center for Housing Studies (JCHS) at Harvard University finds that between 2005 and 2016, households aged 55 and over accounted for 44% of renter household growth. The share of renters in this age group increased to 27% during that time, up from just 22% in 2005.
What’s Driving the 55+ Renter Market?
Experts say the shift is, at least in part, a result of the long-term falloff in homeownership caused by the Great Recession. JCHS estimates suggest that foreclosures likely explain most of the decline in homeownership among middle-aged and older adults. As an illustration: between 2005 and 2015, the homeownership rate among 46-55-year-olds dropped more than 6% percent; it was down nearly as much among 56-65-year-olds.
NAHB cites rising home prices as another driver of the 55+ rental market. Now that their children have moved out or gone to college, older Americans are taking advantage of the sellers’ market to cash in on their long-time family homes. They want to downsize, but a lack of inventory has pushed several into apartment communities.
There’s No Single Renter Profile for Those Aged 55+
Studies show that 55+ renter segment is quite diverse. Some want to live in urban centers where it’s easy to walk to restaurants, entertainment, and medical facilities. Others prefer to age in place, not necessarily in their current home, but rather in the community where they have existing roots or family.
“It’s a lifestyle choice,” says Branden Wermers, director of development for San Diego-based Wermers Cos. “They want to have the flexibility to move. Sometimes their kids are moving, and they want to rent a place where the kids are living, but they don’t want to buy there, because the kids could move again.”Being close to grandchildren is also a consideration for many.
NAHB finds that there are some trends among the 55+ renter cohort. For example, most want to live in low-maintenance, single-story units in low-crime areas. Baby Boomers are also placing a greater emphasis on properties that allow them to be active and social. So apartment buildings with fitness centers, outdoor spaces, and communal areas used for events are in high demand.
Where 55+ Renter Housing is Needed the Most
It should come as no surprise that housing for those aged 55+ is going to be needed most in areas with an aging population, like the Northeast and parts of the Midwest. For example, older households are driving new tenant demand in both Detroit, Michigan and Columbus, Ohio – areas that otherwise have a declining population but where the number of older adults remains high. Research suggests that seniors will make up a bulk of rental growth in Indianapolis, Kansas City, Louisville, Memphis, Milwaukee, and Sioux Falls between now and 2030, as well.
Meanwhile, states like California and Florida benefit from high rates of international immigration, which, on the whole, drives the median age downward. California’s robust economy also attracts young, talented workers from across the world. As a result, the demand for rental housing among age groups is projected to be more balanced in cities like San Francisco, San Diego, San Jose, and Los Angeles.
The Appeal of Renters Aged 55+
Aging renters are a particularly appealing demographic because, at the younger side of the spectrum (ages 55 to 65), they have more disposable income to spend than young adults and families. As a result, they tend to be willing to spend more on rental housing, particularly in well-located communities that offer robust amenities.
Incomes tend to become more constrained as older adults retire and move into the other end of the spectrum (ages 65+). However, income lost in the form of wages is often supplemented via retirement benefits, Social Security, and pensions. Moreover, as Boomers reach age 75+, there’s an expectation that they’ll need rental housing that provides a continuum of care, such as home health aides and other on-site medical services.
So, why does all of this matter for landlords, property managers, and real estate investors? We aren’t just throwing data at you for the sake of wading through data! Instead, we hope you’ll use this data to capitalize on shifting demographic needs and changes. If you’re located in a market that’s expected to experience an uptick in renters aged 55+, consider making property improvements tailored to these residents.