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Where Have All The Rental Units Gone?
Well, they are already occupied. During this last year for many employees, being able to find available and affordable rental units has become a difficult endeavor. There are several reasons for this shortage and the majority relate to these three reasons: the high demand of units due to the 2007 market crash, the baby-boomer and millennial generations and shortage of units. This challenge now directly impacts renter benefits offered in a relocation policy.
- The housing market crash of 2007 lasted for several years and we are still feeling some of the effects even though the availability of homes and the price of homes are slowly increasing. Foreclosures were at an all-time high during the crash and many of those homeowners became renters. Only some of those previous homeowners have now reverted back to trying to own a home, which may not be easy due to the tightening of lending requirements from mortgage companies. This tightening is by no means “bad” as it is was a significant contributor to the crash in the first place.
- The demand for rental units also increased due to baby boomers down-sizing to an apartment and in fact, some baby-boomers want two units—one in the north and one in the south. Another major factor is the millennial generation’s feelings towards owning a home. Many millennials prefer leasing an apartment over owning a home and the top reasons to rent include:
- Affordability. For many, renting is more affordable than buying a home. For instance, they may be able to rent in a desirable neighborhood, although they could not afford to buy a home in the same location. In addition, maintenance issues are the landlord’s responsibility and cost, saving them time and money.
- Freedom. They are free to move again at any time they want whether by desire or a company relocation.
- Mortgage Approval. Even if they want to purchase a home they may not receive a mortgage approval due to their debt to income ratio. Many millennials have high cost student loans to repay and this can affect loan approval.
- Similar to the availability of homes, the availability of rental units is local. You can read an article that there are enough units in the state of Washington and the next article details the shortage of units in California. Many units now being built fall into the “luxury” or “boutique” category that are available with a high rental price tag that not everyone can afford. More apartments are in the process of being built, but they are not yet available to meet the current high demand.
This rental challenge can affect your relocation policies. The Worldwide ERC’s 2015 U.S. Transfer Volume and Cost Survey indicates the average cost to move a current employee renter is $27,327 (9% increase over 2014) and $23,766 (8% increase) for a new hire renter. For the year 2017 (based on 2016 results) will most likely be even higher taking into consideration these additional rental expenses. Despite rising costs, it is important to understand how services around rentals can help improve the employee experience and ensure relocation success.
Specifically, SIRVA has seen an increase in the number of companies covering lease acquisition fees, finder’s fees and guided tours. Lease acquisition costs (credit report costs, application fees) can be controlled by capping this expense between $200 and $300. Finder’s fees are typically charged on the east and west coasts. Paying finder’s fees, which involves having a licensed rental expert “in the know” of available units can be beneficial as renters often must act fast in securing units in certain locations. The time provided to find a rental unit during relocation is already limited, therefore learning about the new area and finding a rental home is difficult. This is when companies provide a guided tour which may be for one-half day (typically four hours) or one-day (eight hours) with some companies offering up to two days. The cost of this tour which various by location, can greatly reduce the employee’s stress level.