A distinctive narrative is emerging online regarding affluent individuals who opt to remain lifelong renters, choosing this lifestyle rather than being compelled by financial constraints. Accounts abound of those who value mobility and prefer not to engage in property maintenance. Recently, Architectural Digest featured an article on such renters, highlighting a 71-year-old finance professional, a journalist from Forbes, and a middle-class family from New York City who relish their traveling lifestyle.

From the perspective of real estate investors, these tenants represent ideal candidates: they are financially stable, likely to commit to long-term leases, and tend to treat rental properties with the same care as their own homes. Recent research indicates a growing trend of “forever renters” throughout the United States.

Insights from the Data

A survey conducted by Entrata, a property management software firm, of 2,000 renters this year revealed some significant statistics. Most notably, 41% of participants expressed that their vision of the American Dream was unrelated to homeownership. Additionally, 20%, or one in five respondents, indicated that they expected to be lifelong renters “by choice” rather than due to financial limitations. Furthermore, 17% noted that their preference for renting stemmed from the financial freedom it afforded them, free from the obligations of a mortgage.

These findings have been interpreted by various media outlets as indicators of a fundamental shift in the American mindset, or as described by Rental Housing Journal, a “paradigm shift.”

However, a degree of skepticism regarding these figures is warranted. The Entrata survey focused exclusively on residents of large apartment complexes, each housing over 50 units, suggesting a concentration of urban renters.

Interestingly, the individuals featured in the Architectural Digest article all resided in either Manhattan or Seattle, locations recognized for their robust rental markets and extensive choices for tenants.

While being a lifelong renter in urban settings like Manhattan, Seattle, or upscale areas of Miami can indeed be a viable and appealing lifestyle choice—particularly for those who can afford it—this arrangement allows them to avoid the burdens of property maintenance, particularly beneficial for frequent travelers.

Cultural factors also play a critical role in shaping these decisions. As someone who has lived in major cities, I can attest that renting is so normalized in these environments that it carries no stigma. I, too, once embraced the identity of a “forever renter.”

Currently residing in suburban Midwest, I can confidently assert that a paradigm shift regarding homeownership is not evident in this region. This is not to suggest a lack of rental options; numerous new apartment complexes have been developed nearby, many of which are built-to-rent communities. Yet, the least expensive studio in the least luxurious complex costs nearly $1,300 per month—approximately the same as a monthly mortgage for a reasonable two- or three-bedroom home in the area.

From a financial perspective, renting does not seem to be the most prudent choice. However, the challenges associated with securing a down payment undoubtedly keep many individuals in rental situations. The abundance of available apartments in newly constructed build-to-rent communities suggests that they are not fully occupied. In contrast, private landlords offering single-family homes tend to attract renters looking for more space relative to cost.

Is There a Cultural Shift Toward Renting?

The issue extends beyond mere costs per square foot; it also encompasses the deeply ingrained culture of homeownership prevalent in many regions, including the Midwest.

Generally, individuals living further from major metropolitan areas are more likely to own homes rather than rent. The notion of aspiring to homeownership is influenced by the surrounding environment; when everyone in the vicinity owns a well-maintained property, it fosters a desire to achieve the same.

This perspective is supported by Forbes, which notes that regional norms significantly impact rental demand, identifying the most and least competitive rental markets.

New York City, unsurprisingly, ranks among the top five most competitive rental markets. Although the city is known for its unaffordability, the culture of long-term renting has been accepted for many years. Renting in New York does not necessarily imply financial struggle; many individuals maintain rental arrangements while owning property elsewhere, and others reside in rent-controlled apartments that suit their needs.

Conversely, the Detroit-Warren-Dearborn metro area ranks among the least competitive rental markets. As Forbes points out, “Renting isn’t as prevalent as homeownership in the Detroit metro area, resulting in less competition for renters.”

This enduring preference for homeownership is further illustrated by statistics reflecting lease renewal decisions—often made voluntarily rather than being dictated by a lack of affordable options.

Recent analysis by RentCafe of various rental markets revealed notable trends regarding occupancy and renewal rates. For instance, suburban Chicago emerged as the leading rental market nationally, boasting a rental occupancy rate of 95.6% alongside a high lease renewal rate of 69.5%. In contrast, while Chicago proper has a commendable occupancy rate of 94.7%, its lease renewal rate stands at only 58.7%.

This discrepancy indicates that many individuals reside in central Chicago for various reasons, yet they may not wish to remain long-term. The elevated lease renewal rates in suburban Chicago primarily result from the overall unaffordability of homeownership in the area.

The data reveals that the aversion to long-term renting tends to be more pronounced in smaller, rural locales within the Midwest. For example, Des Moines, Iowa, has a lease renewal rate of 58.8%, while North Dakota reports an even lower figure of 55.8%. Nevertheless, it is noteworthy that these regions maintain occupancy rates exceeding 90%, indicating a broad prevalence of renting. Investors need not fear a shortage of tenants in smaller Midwest towns.

However, it is crucial to recognize that the majority of renters in these areas are unlikely to be doing so by choice; instead, they often aspire to homeownership as soon as possible. Investors in these regions should anticipate potential high turnover rates among tenants. When a long-term renter is identified, it is a rare and valuable opportunity.

Alternatively, investors might consider targeting regions with an established or developing culture of long-term renting. Identifying such areas can be accomplished by focusing on desirable mid-sized metropolitan regions where renting is both socially accepted and financially viable.

An illustrative example is Grand Rapids, Michigan, which remains affordable and possesses attributes that encourage residents to stay longer. I know individuals who initially moved there for short-term stays but ended up living there for years. The presence of a significant student population also contributes to the normalization of renting.

Concluding Thoughts

Rather than a uniform paradigm shift towards renting as a deliberate choice, the increasing numbers of long-term renters primarily indicate a population that desires homeownership but is unable to achieve it. Nevertheless, desirable locations do have a higher-than-average proportion of individuals who are content to rent long-term.

For investors aiming to minimize tenant turnover, pursuing areas with an established culture of long-term renting is a worthwhile endeavor.

In the previous post: “Is Now a Better Time to Invest in Real Estate Debt or Equity?“