Apartment rents are on the rise in Chicago and most other sections of the nation, but large and growing segment of renters continue to believe leasing a residence is a more affordable option than owning.
Despite the obvious tax advantages of owning the American Dream—a single-family home—barriers to buying for the young Millennial generation also include saving up enough down payment cash while paying off college loans, housing experts say.
While renters are feeling the squeeze of rising housing costs, they will continue to rent because they perceive it to be the more affordable housing choice, according to a new research report from Freddie Mac Multifamily.
The survey—“Profile of Today’s Renter”—reports that 78% of renters believe leasing an apartment is more affordable than owning. That finding is up a stunning 11 points from just six months ago in February of 2018. And, this is the case even as the majority of renters (66%) reported difficulty affording their rent at some point over the past two years.
In Chicago, one of the major forces driving up apartment rents is soaring property taxes, which landlords are forced to pass on to tenants in the form of rent increases, experts say.
The recent skyrocketing reassessment of North Township—which includes the wealthy Gold Coast and the upscale neighborhoods of Old Town and Lincoln Park—likely will mean hefty rent increases in 2019.
The market value of North Township apartment buildings with six units or less surged to $1.3 million from $1.1 million—an appreciation of more than 18% over the past three years, according to Cook County Assessor Joseph Berrios.
As a result of the assessor’s new, improved “state-of-the-art” reassessment model, Berrios declared that the median assessed value of these properties increased to $129,082—a whopping gain of 23.32%.
Other rising costs for small apartment owners include higher water, sewer and garbage fees, which have doubled over the past few years.
The Freddie Mac Multifamily survey also found nearly 9 in 10 renters employed in the essential workforce, such as healthcare and education, had significant difficulty affording the rent over the past two years.
“Views of renting as the more affordable option continue to drive the behavior and satisfaction of a large and growing majority of renters,” said David Brickman, president of Freddie Mac and head of Multifamily.
“While renting is seen as more affordable, this research underscores that renters are feeling the effects of the rising cost of housing, driven in part by lack of supply, increased demand and the cost of construction,” Brickman said.
The survey found the perception of affordability of renting over owning was evident across generations. In fact, Millennials (up 14 points to 75%), Generation Xers (up 11 points to 70%) and Baby Boomers (up eight points to 81%) all saw marked increases in the perception that renting is more affordable than owning.
Here are other findings of the survey, which was conducted online in mid-August among 4,040 adults aged 18 and over, including 1,059 renters, by Harris Poll, on behalf of Freddie Mac:
• While 66% of renters report having trouble affording their month rent over the past two years, only 43% of homeowners surveyed experienced similar difficulties in paying their housing costs.
• More than half of renters surveyed said rent affordability also affected spending on food, utilities and other essentials (51%), as well as savings (50%) and nonessential items (64%).
• For renters living in rural areas, the impacts were particularly stark, with 77% spending less on essential items versus 59% in urban and suburban areas.
• While a majority of renters across generations reported these difficulties, older Millennials (aged 28 to 37 years) reported the greatest hardship, with 79% reporting trouble affording rent over the past two years.
• Renters employed in the essential workforce—such as the healthcare and education sectors—had significant additional difficulty affording rent, with a staggering 88% reporting hardship affording rent over the past two years. This is compared with 65% of all other workforce renters, and 61% of homeowners in the essential workforce.
• Approximately half (48%) of renters working in essential jobs believe it is difficult to find housing that is both affordable and close to where they work—compared with 39% of homeowners in the essential workforce.
“The struggles experienced by renters in the essential workforce are particularly sobering,” noted Deborah Jenkins, senior vice president of Freddie Mac Multifamily. “Nearly 9 in 10 renters experienced some hardship in affording their rent in the last two years.”
Despite the gloomy findings of the survey, a consistent number of apartment dwellers (63%) continue to express their satisfaction with their rental experience, Freddie Mac said. In fact, 58% of renters believe that renting is a good choice for them now and do not have plans to buy a home at this time—up from 54% in February.
Over the last three years there has been a gradual increase in the number of renters who are not interested in buying, according to Freddie Mac. This quarter shows a small increase in this trend, with 23% of renters reporting they have no interest in buying a home—up from 20% in February of 2018. In addition, 42% of baby boomers surveyed expressed no interest in owning a home.
The survey found that 66% of renters plan to continue leasing their next residence—up 11 points from February of 2018. Consistent with this view, fewer renters (41%) believe buying a home will be equally or more affordable in the next 12 months—down from 46% in February of 2018.
For more housing news, visit www.dondebat.biz. Don DeBat is co-author of “Escaping Condo Jail,” the ultimate survival guide for condominium living. Visit www.escapingcondojail.com.