After the COVID-19 pandemic caused many to flee large cities in 2020, 2021 has brought renters back into these markets, with a major increase in rental applications. According to a 2021 study from RentCafe, which examined rental activity in 130 markets across the U.S., rental activity has returned to pre-pandemic levels with cities like San Francisco, Los Angeles and Seattle seeing a major spike in new renters.
According to the report, titled “The Great Return: Renters Jumpstart Large Cities with Surge in Applications in 2021,” the first half of the year showed a 13 percent national increase in rental applications, compared to the 12 percent decrease in activity that was reported over the same time period in 2020. Additionally, during the peak rental season, which begins in March, approximately 45 percent more applications were filed than in 2018 and 2019, when applications rose by an average of 23 percent.
Rental applications increased overall in the nation’s 30 largest cities, according to RentCafe. On the West Coast, San Francisco led the charge with a 79 percent increase in rental applications. The city was ranked second just behind New York City, which saw a 95 percent increase in rental activity during the first half of the year.
The Bay area in general reported positive rental growth, with San Jose reporting a 54 percent increase in rental applications. According to the report, these spikes were in large part due to Generation Z applicants, who were the most active renting generation this year. In the past year, Zoomers’ rental applications increased by 198 percent and 87 percent in San Francisco and San Jose, respectively.
Overall, those in Generation Z make up for 27 percent of the nation’s renters. Nationally, the report observed a 39 percent increase in rental applications in the generation over the past year, while reporting a 10 percent increase in rental applications for those in all other age groups.
“There’s a lot of demand chasing a very limited amount of supply…You have a lot of supply chain issues in terms of trying to build additional properties, not only housing but rental and the cost associated with doing that,” said Doug Ressler, business intelligence manager for Yardi Matrix, RentCafe’s sister site. “The thing right now is that millennials are staying longer in rentals, you’ve got the Z-Generation coming on board, and that is the prime sweet spot of renters. They’re replacing the renters, so what you have is a lot of pent up demand.”
Los Angeles also saw a high increase in rental applications from those in the younger generations. Generation-Z was the most active in Los Angeles’ residential market, with RentCafe reporting an 84 percent increase in rental activity for this cohort over the past year.
Overall, Los Angeles reported a 28 percent increase in rental activity in the past year. While seeing a major increase in activity from those in Generation-Z, Los Angeles also saw increased activity from those earning between $50,000 to $75,000 per year. This group of renters, which increased applications by 46 percent since 2020, primarily moved within the city in search of better deals and closer proximity to job locations, Ressler said.
“The Port of Los Angeles is again the top importer, so a lot of the jobs and workforce has come back to the port of Los Angeles, which is driving a lot of the other economic increases across the Los Angeles basin that we’re seeing,” Ressler said.
Similarly, Seattle reported positive rental activity with an overall 55 percent increase in applications over the past year. Of all rental applications submitted in Seattle, RentCafe reported 69 percent were new renters moving into the city, while an additional 43 percent moving within the city.
Nationally, RentCafe found that earners in the top two income brackets were most likely to be in search of new deals on apartments. According to the report, 33 percent more renters earning between $75,000 and $100,000, and 34 percent more renters earning more than $100,000 moved during the first part of this year compared to the same time in 2020. Ressler said this is likely due to many in this income bracket looking for larger space or better work-from-home accommodations.
“Now what we’re starting to see is what we call ‘the lifestyle renter’ starting to come back and inhabit rental properties. They may have left to go get a second home or may have gone out to more suburban areas, but now what we’re starting to see is that egress back into high end rentals,” Ressler said.
Looking ahead, Ressler said rental activity overall likely will continue to soar. However, this could add some additional challenges if high occupancy rates in large cities drive rental rates higher. According to a national multifamily market report from Yardi Matrix, rental rates in the past month have increased more than eight percent. While many of the nation’s largest cities have seen growth in rental rates, Resssler said smaller cities could reap the benefits over the next several years should rates in larger cities remain high.
“So what we see is really the increase in rents and the increase in occupancies. Occupancy is really at an all time high,” Ressler said. “We’re seeing it in places like Boise, Idaho, Oklahoma…The cost has not risen as much in those places, so you could make a fairly good wage and still be able to afford a fairly good apartment or house if it’s available.”