The number of single-family homes that are rented grew by 5 million between 2006 and early 2017, according to a new analysis out Wednesday from Zillow. This boom in rentals, which are mostly concentrated in the lower end of the housing market, contributed to the crunch in affordable inventory, limiting options for lower- and middle-income buyers.
In total, about 270,000 fewer homes are sold each year compared to 2006, or about 5 percent of the homes that would sell in a typical year, according to the Zillow® analysis. About 120,000 of these lost sales were among the most affordable homes that are often sought by first-time buyers.
As owners lost their homes to foreclosure following the housing crisis, the renter population grew rapidly– the share of single-family homes being rented out jumped from about 13% in 2007 to a high of 19.2% in 2016. Demand for single-family rentals remains strong — 45% of renters would like to rent one, but only 28% can actually find a single-family home to rent.
“For the past 10 years, the number of single-family homes that are rented has grown steadily and remains near the highest levels ever recorded,” said Zillow senior economist Aaron Terrazas. “The combination of foreclosures and growing rental demand following the housing crash was an attractive opportunity for investors – large and small – who were able to buy foreclosed homes and use them to meet the rental demand. At the same time, many long-time owners have opted to hold onto their homes as rentals even after they decide to move somewhere else. With such a large portion of single-family homes being rented out, and with new homes being built more slowly than the market needs, home values will continue to rise, particularly among the most affordable homes with the highest demand.”
Millennials are the largest group of buyers in the housing market, driving up competition for less expensive, entry-level homes. But over the past five years, the homes being bought and converted to rentals are increasingly the same affordable starter homes that first-time buyers are after, limiting buyers’ options and increasing competition. Almost 40% of rented single-family homes bought since 2012 are among the most affordable, compared to 34% of single-family rental homes that were bought before the housing market crash.
Across the country, 37% of rented single-family homes are among the least valuable in their housing markets. In Detroit, Cleveland, and St. Louis, more than half of the homes being rented are among the least valuable in the area. In other markets, such as Boston, San Jose and Seattle, upward of 40% of single-family rentals are among the priciest third of homes in those communities.
| Metropolitan Area | Share of Single-Family Homes that are Rented, 2016iii | Share of Single-Family Rentals in the Least Valuable Third of the Market | Share of Single-Family Rentals in the Middle Third of the Market | Share of Single-Family Rentals in the Most Valuable Third of the Market |
| United States | 19.2% | 37.2% | 36.0% | 26.8% |
| New York/Northern New Jersey | 11.3% | 43.3% | 27.5% | 29.2% |
| Los Angeles-Long Beach-Anaheim, CA | 24.6% | 29.0% | 35.2% | 35.8% |
| Chicago, IL | 12.5% | 47.0% | 29.2% | 23.8% |
| Dallas-Fort Worth, TX | 16.4% | 34.4% | 43.2% | 22.4% |
| Philadelphia, PA | 14.8% | 46.7% | 34.4% | 18.9% |
| Houston, TX | 16.1% | 36.4% | 37.5% | 26.1% |
| Washington, DC | 14.8% | 24.0% | 36.2% | 39.8% |
| Miami-Fort Lauderdale, FL | 20.5% | 29.7% | 35.0% | 35.3% |
| Atlanta, GA | 19.8% | 39.5% | 35.4% | 25.2% |
| Boston, MA | 8.2% | 21.8% | 25.3% | 52.9% |
| San Francisco, CA | 20.8% | 33.2% | 33.4% | 33.4% |
| Detroit, MI | 17.1% | 59.3% | 28.0% | 12.7% |
| Riverside, CA | 24.7% | 33.8% | 33.4% | 32.8% |
| Phoenix, AZ | 20.8% | 34.7% | 42.1% | 23.1% |
| Seattle, WA | 16.6% | 31.7% | 27.7% | 40.6% |
| Minneapolis-St Paul, MN | 10.2% | 45.5% | 29.3% | 25.2% |
| San Diego, CA | 25.1% | 27.1% | 36.1% | 36.8% |
| St. Louis, MO | 14.3% | 52.6% | 30.8% | 16.6% |
| Tampa, FL | 18.2% | 42.3% | 32.9% | 24.9% |
| Baltimore, MD | 17.0% | 43.8% | 35.6% | 20.6% |
| Denver, CO | 15.0% | 30.2% | 38.3% | 31.4% |
| Pittsburgh, PA | 13.3% | 46.0% | 28.3% | 25.7% |
| Portland, OR | 16.5% | 34.0% | 35.9% | 30.2% |
| Charlotte, NC | 18.2% | 29.0% | 40.3% | 30.7% |
| Sacramento, CA | 23.3% | 34.3% | 39.6% | 26.2% |
| San Antonio, TX | 18.2% | 25.4% | 50.1% | 24.5% |
| Orlando, FL | 21.2% | 32.4% | 38.4% | 29.2% |
| Cincinnati, OH | 14.5% | 48.2% | 30.0% | 21.8% |
| Cleveland, OH | 14.8% | 55.4% | 29.2% | 15.4% |
| Kansas City, MO | 18.3% | NA | NA | NA |
| Las Vegas, NV | 27.5% | 33.7% | 41.9% | 24.4% |
| Columbus, OH | 18.1% | 43.9% | 33.6% | 22.5% |
| Indianapolis, IN | 17.8% | NA | NA | NA |
| San Jose, CA | 19.6% | 23.3% | 35.6% | 41.2% |
| Austin, TX | 18.2% | 32.7% | 36.1% | 31.2% |
