Jesus Felizzola says he's renting out of fear. His experience with homeownership turned into a nightmare when he had to sell his home at a substantial loss.
Jesus Felizzola says he's renting out of fear. His experience with homeownership turned into a nightmare when he had to sell his home at a substantial loss. Joshua Brockman/NPR
With the housing market still in the doldrums, home-seekers and the Obama administration are reconsidering the emphasis on buying over renting.
Though many people may be thinking about renting, government figures show that they've yet to commit. The vacancy rate for rentals is at 10.6 percent, near an all-time high, according to the U.S. Census Bureau.
The homeownership rate is falling, and home sales remain weak — they fell 5.1 percent in June, according to the National Association of Realtors. But that hasn't shifted more people into rentals.
Still, changing attitudes may boost the rental market going forward.
— The lion's share of renters right now are young adults. But an increasing number of Americans over the age of 55 are expected to rent in the coming decade.
— Immigration continues to be a driving force in the rental market. Almost one-quarter of renter households were foreign-born in 2009.
— By 2020, minority households will make up the majority of renters.
Source: The State of the Nation's Housing 2010, Harvard University's Joint Center for Housing Studies
"The weak economy is sapping that demand as people go back home to live with mom and dad, or with a brother or sister, or they take on a roommate or become someone's roommate," says Mark Obrinsky, chief economist for the National Multi Housing Council, a trade group for the apartment industry.
With so many homes and apartments on the market, rents are being held down, according to the government's consumer price index for rent. The CPI inched up just 0.3 percent over the past year — that's the lowest yearly increase since the late 1940s.
Obrinsky says it's going to be tough for the rental market to recover until the employment market really picks up. But when the economy recovers, he expects to see a rebound in demand for apartments and rental houses. That's because tighter lending standards will make it tougher for people to buy homes.
And former homeowners, like Jesus Felizzola, are seeing the advantages of renting. He is relieved to be renting a studio apartment in one of Washington, D.C.'s posh neighborhoods.
"This is what you get for $1,800 a month — a little box in Dupont Circle," Felizzola says. Still, he says he's happy to be renting even though his apartment is a far cry from the three-bedroom house he once owned in North Miami Beach.
After living in Florida for several years, he moved to the nation's capital to take his dream job as a medical researcher. But his experience with homeownership turned into a nightmare when he had to sell his home at a substantial loss.
"I decided to rent out of fear of not feeling comfortable about investing again," Felizzola says. "I decided to rent out of, well, I would say economic reality."
One-third of Americans rent. And in many major cities, the numbers are substantially higher. In the coming months, the Obama administration is likely to put more attention on renting. Reforming the housing finance system is on its agenda.
Shifting The Focus Toward A 'Balanced Housing Policy'
A number of administration officials have expressed concern that there was too much of a focus on homeownership in the past. One official tells NPR that "rentals are better financial options for many Americans."
Nicolas Retsinas, the director of Harvard's Joint Center for Housing Studies, says the federal government is now wrestling with whether to favor homeownership or "seek a more balanced housing policy, talking more about giving people options, worrying more about whether people have a decent place to live, rather than whether they own or rent."
Rent Is No Longer A 'Four-Letter Word'
Attitudes about renting have also changed. Retsinas says "rent" is no longer a "four-letter word."
"In the past, you rented if you didn't make enough money," he says. "You rented if you weren't ambitious. You rented if you weren't sort of smart enough. But as it turns out, as we look in recent years, renting turned out to be a pretty smart thing to do."
It was a smart move because renters weren't stuck with mortgages worth more than their homes. Another advantage to renting in this economy includes having the flexibility to move to pursue a job. That's not so easy if you own a home that you can't sell.
Even though renters don't get the same kind of tax breaks as homeowners, renting may feel more secure in this uncertain economy.