There’s an enormous demographic and cultural change unfolding in our national housing picture. Renters are pouring into suburbs as former homebuyers have been priced out of the market in many localities. This trend is perhaps most sharply illuminated by individuals such as Mark. After three years of renting, he has come to understand that purchasing a home in the community he wants to live in is financially out of reach. Mark explained, “If I want to stay here, it’s pretty much untenable.” In his letter, he made note of the challenges that first-time homebuyers are currently experiencing.
As Tara Raghuveer, head of the Tenant Union Federation, told us, the suburban rental boom is in full swing. That spike has been fueled by worsening affordability constraints. She noted that a lot of these suburbs have changed from mostly homeowner-majority communities to renter-majority suburbs. In fact, recent data reveals that 15 suburbs have made this shift, reflecting a broader trend across the United States.
That’s an alarming trend, said National Apartment Association Vice President of Research George Ratiu. Similar homes in the neighborhood would now require renters, like Mark, to pay an additional 30 percent on their monthly housing costs compared to what they are paying now. This dramatic juxtaposition underscores the mounting financial hurdle that would-be homebuyers are grappling with as prices and interest rates continue to rise.
In Lake Villa, Illinois, it’s a matter of life and death. Andrew Decker provides an example that his extended family would like to purchase the home in which they currently live, a $340,000 house. And yet, he told us his hope, “We would like it to be our permanent home but we can’t afford the price.” Decker’s sentiment is one shared by countless families who dream of having homes in neighborhoods they already live in.
Average interest rates for popular 30-year fixed home loans hover just under 7%, a rate not seen since before the 2008 financial crisis. This substantial rise in the cost of borrowing has only added to the hurdle of homebuying for many prospective buyers.
Developers are responding to the increasing demand for rental properties. They are building all kinds of housing, including multifamily complexes, expressly targeted to the suburban renters. Part of this decline is a trend toward meeting a population that is moving more and more in the direction of desiring rental over ownership.
The suburbanization trend extends beyond individual stories. This phenomenon is playing out in fast-growing Sun Belt metros like Dallas, Houston, and Miami. Just like their peers, in lock-step cadence with Northeastern cities like Boston and Philadelphia. In reality, homebuying has gotten harder in suburban counties around Dallas than in Dallas County.
Even more telling, five of the top 20 metro areas—Dallas, Minneapolis, Boston, Tampa and Baltimore—justifiably illustrate the trend. Suburbs in these advanced second-tier metro areas are pulling in renters much quicker than core urban cities. From 2018 to 2023, rentership exploded. In reality, it went up by at least 5 percentage points in 11 of the 20 suburbs that ring the largest U.S. metro areas. Perhaps most notable of all, the share of residents who rent in home-rule Dallas suburbs grew by 17.6% in that span.
For example, suburbs like Frisco, McKinney and Grand Prairie, all suburbs of Dallas-Fort Worth, have each absorbed more than 5,000 new renter households since 2018. A number of factors have played into this influx. Importantly, lifestyle changes induced by the pandemic and the spread of remote work have a major influence.
Housing economist Jay Parsons points to the emergence of “suburban downtowns,” which offer residents access to amenities while still maintaining a suburban lifestyle. He explained how renters can enjoy proximity to their jobs and local attractions while benefiting from lower rents compared to urban living.
“You can still be close to your job. You can be close to nice restaurants and shops but live in a suburban area where you’re still using a car, and you still have probably a rent that’s more affordable than living in most downtowns.” – Jay Parsons
The realities of the suburban lifestyle just can’t be ignored. Raghuveer warned that as people move further from city centers, they may face difficulties related to transportation and access to employment opportunities. She illustrated that as residents move outside the city they are more and more distanced from transit. This distance may further serve to limit their access to employment opportunities.