Richard Florida’s work, The Great Reset, has launched a great discussion about the place of home rental in American life and the American economy. I’ve been doing a lot of research and thinking on apartment renting myself, and have a few thoughts on what could be happening now, and in the future.
I would argue that high rates of home renters (vs owners) is a sign of a dynamic economy, rather than the cause. Places like New York, San Francisco (and in Canada Vancouver & Toronto) are places with jobs, especially “creative” knowledge and service/experience economy jobs. These cities attract tens of thousands of both national migrants and international immigrants annually to work in and experience the dynamic financial, high-tech and artistic clusters (these are typically well educated immigrants and migrants).
Newcomers to cities (almost any place, actually) have high propensities to rent–especially in expensive places, which these cities are.
Many of these migrants are probably not intending to stay when they relocate to these cities. They are coming to experience them. Creative, smart people are attracted to these dynamic cities because they are full of other creative, smart people (interacting with other smart people makes you smarter [Ed Glaeser]). They are also full of great amenities and interesting — even unique — clusters.
Young, smart people go with the idea of experiencing the jobs and amenities for a few years, and then perhaps moving “back home” or at least closer to family. Therefore renting is ideal.
A concern for the future:
In the past, if they did decide to stay, they might have bought a place in nearby suburbia, or perhaps a condo or townhome closer in. This made room for more newcomers in the rental, which helped to keep these cities’ economies humming.
If suburbia becomes less appealing, because of fewer amenities and poor transit and automotive congestion, will these newcomers along with born-and-raised residents end up renting for much longer periods of time? Even if they want to buy a small urban home, this will not be cheap. Tighter mortgage lending rules may mean saving for much longer before buying, or making it impossible for some.
This will mean fewer rental spots for newcomers, which might end up serving as a break on economic growth in that city. It will also drive rental rates up further, creating an additional social, political and economic challenges.
What other challenges will the rental society bring?