Some rental market trends will continue from the previous year – from rental investors’ reluctance to acquire new properties in a higher-mortgage-rare environment, to increased competition from real estate agencies in a sluggish housing market.
Other trends are brand new this year – like rent growth moving to markets outside of the Sun Belt and an increase in the number of Accidental Landlords.
1. Population of Accidental Landlords will increase as the housing market remains sluggish, motivating more Sellers to rent out their homes.
Accidental Landlords – rental owners who acquired their rental properties due to circumstance and don’t consider themselves as Investors – are on the rise for the first time since 2018. Why? A stagnant housing market is motivating some potential Sellers to rent out their properties rather than putting them up for sale, at least until conditions are more favorable.
These owners should hire licensed property managers, so they ensure they are in full compliance of the law as well as the time requirements of overseeing the rental property, especially if you have a full-time other job.
2. Many Investors will remain reluctant to acquire new properties as home prices and mortgage rates remain high, coupled with low inventory.
Although most small-portfolio investors continue to see residential rentals as a smart investment at this moment in time, just a third of those actually plan to add new rental properties to their portfolio in 2024 & 2024. This is unlikely to change as long as mortgage rates remain high, and as low inventory in the market keeps home prices elevated – though some investors may reenter the market as interest rates come down throughout the year.
3. Renters and Rental Owners will expect rental processes like payments, maintenance, and communications to be seamless.
Over the last several years, we’re witnessing a change in the level of comfort with technology.
Owners are moving to electronically sending and receiving payments, signing documents, viewing reports & communicating with their property management team.
Tenants like to complete the rental process like paying rent, submitting maintenance requests, signing leases & communicating with their property managers online. This preference cuts across generations with even the oldest renters expressing an interest in online rental processes although they may need a bit of extra help.
4. Renters’ finances will be strained as rents remain high, savings decrease & debt increases.
Over the last year, renters’ household incomes have stayed roughly the same as inflation and high rent prices have continued to strain affordability. As a result, few renters are able to pay their bills on time and in full; debt among renters is on the upswing; and savings are on the decline. With student loan payments having resumed in 2023, these conditions are expected to worsen in the coming years.
With rent prices remaining significantly higher than they were prior to the pandemic, property management companies are increasingly concerned with renter quality, and are increasing their focus on tenant screening as the pool of qualified renters shrinks, although that is never a guarantee of tenant quality as circumstances can change through the rental period.
5. The number of families living in rental housing will increase, resulting in a strong demand for single-family rental properties.
For the 2nd year in a row, multi-generational households and families are two of the fastest growing household types in the population of renters. Due to the rising costs of inflation, there is more evidence of the growth of two-household arrangements: families with kids and parents with adult children living together in rental housing.
6. The population of older renters will increase, resulting in greater need for accessible, affordable rental properties.
The number of older adults is growing and are estimated to be 1 out of every 5 Americans will be of retirement age. The number of older renters has grown extensively between 2010 and 2020 and the trend appears to continue with rising inflation.
The growing population of older residents – many of whom will live alone – will need access to ADA-accessible dwellings within communities that can support their evolving needs. But they’ll also need to have affordable housing as they will be on a fixed income, of which our current rental stock of housing can accommodate on the scale that will be needed.
7. Increased attention will be given to fees that property management companies charge.
In July of 2023, the White House released a statement on “junk fees” in rental housing. Defined as fees that are added onto rents that exceed the cost of providing a service, or that renters assume are included, the gov’t encouraged rental housing providers to provide greater transparency when charging fees to renters and disclosing those fees during the application and leasing process.
8. Rental properties will need to provide more amenities to attract better renters.
Amenities or benefits packages is the new norm whereby renters are expecting to get more out of their rental experience. Convenience has been in high demand ever since the pandemic and they are OK with paying a bit more if the benefits out way the cost. Sometimes it is easier to budget ahead of time by selecting the items being offered than spending moneys on the same thing that cost more when adding up the wear & tear on vehicles, gas & the extra time to purchase, etc.
The top 5 home amenities desired by renters according to a recent report from NMHC (National MultiFamily Housing Council):
- High-Speed Internet access & good connectivity
- Walk-in closet for added storage, especially in smaller units.
- Soundproof walls for increased privacy
- Balcony or Patio so they can increase their outdoor living space.
- In-unit Washer & Dryer as convenience is king
Some other miscellaneous items are an added plus:
- Walkability to nearby amenities and locations
- Ease of payment – again the convenience of taking care of this online vs going to the post office, bank or mailing it out.
- Energy Efficient upgrades to lower their utility costs.
