By the Numbers
A demographic snapshot of the renter and the homeowner
This document is intended for institutional investors and is not subject to all of the independence and disclosure standards applicable to debt research reports prepared for retail investors.
The pandemic drove a migration of urban, multifamily renters into suburban, single-family rentals. The long-term implications are not yet clear. These tenants eventually could become homeowners or could settle in as long-term renters. There are some significant differences in the demographic and financial profiles of tenants and homeowners, and single-family renters tend to emerge in the crossover space between the two.
Owner versus rental housing
They are approximately 122 million occupied homes or households in the US, with 64.4% owner-occupied (78.8 million) and 35.6% rented (43.6 million) (Exhibit 1). Total US housing stock is roughly 143 million, which includes vacant, seasonal and other homes not used as primary residences.
Exhibit 1: Occupied US households are 64% owned and almost 36% rented
Note: *Estimated holdings of detached, single-family homes of institutional SFR operators. Household data is from 2020. Census Bureau estimates for 2022 put total households at about 129 million. Different Census Bureau surveys use different methodologies and estimates can vary modestly.
Source: US Census Bureau, American Community Housing Survey, Amherst Pierpont Securities
The majority of owner-occupied homes are single-family structures (69.7 million or 88%), while the majority of renters live in traditional multifamily buildings (27 million or 62%) with between two and 50 or more units. There are 84.4 million occupied single-family structures, which comprise 69% of total households, with 14.7 million of those (17%) being occupied by renters. Recent estimates are the institutional single-family rental (SFR) operators own about 350,000 homes; that is 2.4% of the 14.7 million single-family rental homes and 0.4% of total single-family households.
The differences between renters and homeowners
There are some significant differences in the demographic and financial profiles of renters and owners. Renters tend to be younger than homeowners: 35% of renters are below the age of 35, compared to only 10% of homeowners (Exhibit 2). Renters also tend to have less education than homeowners, with less than 30% of them completing a bachelor’s degree or higher, compared to nearly 40% of homeowners.
Exhibit 2: Renters tend to be younger and less educated than homeowners
Note: Data as of 2020.
Source: American Community Survey, US Census Bureau, Amherst Pierpont
Homeowners are more frequently white and have significantly higher mean incomes than renters (Exhibit 3). The median income for homeowners was more than $81,000 in 2020, compared to a median income for renters of $42,000. Nearly 40% of homeowners have incomes above $100,000 compared to just 16% of renters. Some of this difference is due to the younger age profile of renters, though over time the lower educational attainment is correlated to lower lifetime earnings.
Exhibit 3: Renters are more ethnically and racially diverse, but skew to lower average incomes
Note: Racial and origin percentages do not sum to 100% as some respondents identified themselves across multiple categories. Data as of 2020.
Source: American Community Survey, US Census Bureau, Amherst Pierpont
The median monthly housing cost for renter-occupied homes was $1,096 in 2020, compared to $1,142 for owner-occupied properties. Across income levels, the percentage of renters who are cost burdened—meaning they spend 30% or more of their monthly income on rent—is typically much higher than the percentage of homeowners. The percentage of owner- and renter-occupied households that are cost burdened declines as income rises. At income levels below $20,000, 89% of renters and 76% of homeowners are cost burdened; this falls gradually to 28% and 23%, respectively, for household incomes between $50,000 to $75,000. The difference between renter and owner households mostly converges at higher household income levels, where 7.2% of homeowners with incomes above $75,000 are cost burdened, compared to 7.6% of renters.
The single-family renter
This crossover to higher household incomes is the target for many single-family rental operators. Single-family homes have higher rents and operating costs than traditional multifamily, and they appeal to suburban families that need more room. SFR operators are typically not competing with low-income or affordable housing providers, in part because the economics of single-family rentals don’t work for the median or lower-income tenants or landlords.
Arguably, all SFR investors do compete with upper middle income, prospective first-time home buyers. Institutional scale operators remain less than 3% of the single-family rental market and own less than 0.5% of the existing supply of single-family homes.
Mary Beth Fisher, PhD
1 (646) 776-7872
This material is intended only for institutional investors and does not carry all of the independence and disclosure standards of retail debt research reports. In the preparation of this material, the author may have consulted or otherwise discussed the matters referenced herein with one or more of SCM’s trading desks, any of which may have accumulated or otherwise taken a position, long or short, in any of the financial instruments discussed in or related to this material. Further, SCM may act as a market maker or principal dealer and may have proprietary interests that differ or conflict with the recipient hereof, in connection with any financial instrument discussed in or related to this material.
This message, including any attachments or links contained herein, is subject to important disclaimers, conditions, and disclosures regarding Electronic Communications, which you can find at https://portfolio-strategy.apsec.com/sancap-disclaimers-and-disclosures.
Copyright © 2023 Santander US Capital Markets LLC and its affiliates (“SCM”). All rights reserved. SCM is a member of FINRA and SIPC. This material is intended for limited distribution to institutions only and is not publicly available. Any unauthorized use or disclosure is prohibited.
In making this material available, SCM (i) is not providing any advice to the recipient, including, without limitation, any advice as to investment, legal, accounting, tax and financial matters, (ii) is not acting as an advisor or fiduciary in respect of the recipient, (iii) is not making any predictions or projections and (iv) intends that any recipient to which SCM has provided this material is an “institutional investor” (as defined under applicable law and regulation, including FINRA Rule 4512 and that this material will not be disseminated, in whole or part, to any third party by the recipient.
The author of this material is an economist, desk strategist or trader. In the preparation of this material, the author may have consulted or otherwise discussed the matters referenced herein with one or more of SCM’s trading desks, any of which may have accumulated or otherwise taken a position, long or short, in any of the financial instruments discussed in or related to this material. Further, SCM or any of its affiliates may act as a market maker or principal dealer and may have proprietary interests that differ or conflict with the recipient hereof, in connection with any financial instrument discussed in or related to this material.
This material (i) has been prepared for information purposes only and does not constitute a solicitation or an offer to buy or sell any securities, related investments or other financial instruments, (ii) is neither research, a “research report” as commonly understood under the securities laws and regulations promulgated thereunder nor the product of a research department, (iii) or parts thereof may have been obtained from various sources, the reliability of which has not been verified and cannot be guaranteed by SCM, (iv) should not be reproduced or disclosed to any other person, without SCM’s prior consent and (v) is not intended for distribution in any jurisdiction in which its distribution would be prohibited.
In connection with this material, SCM (i) makes no representation or warranties as to the appropriateness or reliance for use in any transaction or as to the permissibility or legality of any financial instrument in any jurisdiction, (ii) believes the information in this material to be reliable, has not independently verified such information and makes no representation, express or implied, with regard to the accuracy or completeness of such information, (iii) accepts no responsibility or liability as to any reliance placed, or investment decision made, on the basis of such information by the recipient and (iv) does not undertake, and disclaims any duty to undertake, to update or to revise the information contained in this material.
Unless otherwise stated, the views, opinions, forecasts, valuations, or estimates contained in this material are those solely of the author, as of the date of publication of this material, and are subject to change without notice. The recipient of this material should make an independent evaluation of this information and make such other investigations as the recipient considers necessary (including obtaining independent financial advice), before transacting in any financial market or instrument discussed in or related to this material.