Apartment Renewal Rates on the Rise? 4 Reasons Renters Should Stay Put
In a rental market where demand is high, consider remaining where you are.
Young man relaxing on leather chair with cup of coffee in his living room(Getty Images)
Increasing rental rates and home prices have been a hot topic of conversation for some time. There's a perfect storm of factors: Homeownership is the lowest it’s been in 50 years, in many places the cost of living outpaces wage growth and new development isn’t being completed fast enough to meet demand.
“As our economy continues to add jobs, we’re creating more households. And as those households are formed, they, of course, need a place to go live,” says John Chang, head of research for real estate investment services company Marcus & Millichap.
Don’t expect the narrative to change anytime soon. While new construction continues in the rental sector, it’s still struggling to catch up with demand, and mid- and lower-price properties remain competitive among renters.
Vacancy rates in multifamily properties reached 3.5 percent in the third quarter, the lowest point since 2000, according to Marcus & Millichap’s fall 2016 report on U.S. multifamily property.
More Americans are choosing to renew their leases rather than hunt for a new apartment, which points to a desire to avoid climbing rents. They're also choosing to make their rental a more permanent home. Chang notes that currently a little more than half of renters renew their leases, which is only slightly higher than normal.
While the modest increase in renewal rates is only a minor factor in the low vacancy rates compared to the growing number of new households, Chang says it shows that renters who may consider renewing their leases might be more likely to stay put than battle a tight market.
To try to offset the low housing supply, more apartment communities are being built. By the end of 2016, 320,000 new units are expected to be completed. But much of that new development focuses on high-end properties, also known as “Class A” communities.
For the majority of renters, those new luxury properties are out of reach, and the thought of another rental rate hike makes many cringe. Rental information company Apartment List reported that cities such as Tacoma, Washington, and Colorado Springs, Colorado, have seen rent grow by 9.2 percent and 8.1 percent, respectively, from October 2015 to October 2016.
The good news is while you’re almost certainly paying ever-higher rental rates, the changing market means you can expect more out of your renting experience. Housing providers far and wide are offering new amenities to attract renters and compete to lease apartments at premium rates.
“[Landlords] know, and the market shows, [rental rate increases are] going to ease up a little bit over the next few years, where occupancy rates will continue to be high and higher than long-term averages, but not quite as high as they were over the past year,” says Nat Kunes, vice president of product for property management software company AppFolio.
Not everyone needs two indoor pools and a personal dog-wash station, but we’re living in a market where the dirt-cheap apartment is disappearing or has been renewed for another year. The inexpensive rents you remember are gone – and they likely won’t return. It’s time to turn your focus to maximizing the rent you do have to pay.
Here are four reasons to consider staying in your current rental.
More than an apartment. To continue attracting tenants at premium rates, apartment communities are offering more and more amenities – from barbecues and tennis courts to smart thermostats and package delivery.
As that industrywide competition continues, renters benefit from the evolution of the apartment communities. “Certain things that are considered amenities today will become de facto standards,” Kunes says, noting automated door locks that open with a phone app or keycard are gaining popularity. As time goes on, high-tech locks – and many other perks – will become an expected part of renting.
Amenities you actually want. Especially if you’re planning to live there for longer than a year, don’t be afraid to be picky with what you want out of your community.
You may not need the business conference room a property offers, but services like garbage pickup from your door or in-unit laundry could make a world of difference.
From a landlord perspective, providing the right community amenities encourages tenants to stick around, says Kristen Gucwa, vice president of marketing and national lease-up operations for property management company Richman Signature Properties. “We are seeing those high occupancy levels. If you’re able to offer [tenants] what they’re looking for, you’re going to see that,” she says.
Longer leases offer more affordability. Most apartment communities will offer a lower rate if you agree to sign a longer lease, most often 18 or 24 months. A longer lease term locks in your rate, allowing you to avoid increases that can come with a renewal.
With a lease renewal, landlords and property managers aim to keep as close to current market rates as possible, but there’s something to be said for the money the property saves by not having to deep clean an apartment and have it potentially sit vacant between tenants.
If your lease is up and you’re not sure about signing another 12-month lease for a higher rate or agreeing to pay month-to-month for even more, Kunes says apartment communities are opening up new options for renewal, including leases for three or six months. The renter will pay more than a 12-month lease may require, but this option also puts off the cost of moving and offers greater flexibility, plus there's room to discuss concessions that may keep the rent at market rates without hitting your wallet too hard.
You can get personal. Regardless of how long you live there, you shouldn’t be afraid to make your apartment feel like home, and apartment communities are recognizing this.
Gucwa explains that Richman Signature Properties is helping tenants personalize their apartments with their choice of paint colors for the walls, customized closet organization and resident clubs that bring tenants together based on shared interests.
Many property managers and landlords would welcome a tenant painting the walls or customizing a space if it means retaining the tenant for years to come.
“You’re starting to see lifestyle choices that you would get by homeownership, but now you’re seeing it in the apartment world,” Gucwa says.