Over the past few years, U.S. housing affordability has significantly worsened. The aftermath of the Pandemic Housing Boom saw home prices soaring, mortgage rates more than doubled, and the cost of repairs, insurance, and property taxes also shot up. That’s all led to fewer people being able to afford to buy homes, and as a result, homeownership has decreased in some markets.
With higher financial barriers to buying a home, in many markets, a larger share of households have turned to renting instead. This bump in rental demand presents potential opportunities for real estate investors, particularly in metros where renting has become more prevalent.
To see which markets are more primed for investor activity, LendingOne analyzed year-over-year changes in the rental share of housing units—or “rentership”— across the 75 largest metros by population.
LendingOne’s Topline Findings:
- 47 of the largest 75 U.S. metros saw year-over-year growth in their rental share.
- Renting remains the most popular in the most expensive housing markets, namely San Jose, Los Angeles, and New York City
- The metro areas that made the biggest year-over-year rental share gains were Toledo, Cape Coral, and Minneapolis.
Top Five Metros with the Most Rentership Growth Year-Over-Year:
- Toledo, OH (+8.7 percentage points)
- Cape Coral-Fort Myers, FL (+8.5 percentage points)
- Jacksonville, FL (+7.7 percentage points)
- Minneapolis-St. Paul-Bloomington, MN-WI (+7.7 percentage points)
- Portland-Vancouver-Hillsboro, OR-WA (+7.0 percentage points)
Annual Shift in the Share of Local Households that are Renters
Population Growth and Housing Trends
In general, most markets see both the number of homeowners and the number of renters increase over time as the overall population ticks up. However, if the pace of renter household formation significantly outpaces owner household formation, then that could indicate a deterioration in home affordability in that region.
Affordability Pressures in Growing Renter Households
While populations tend to grow across both renters and homeowners, when renter household formation significantly outpaces owner household formation, it signals that home affordability is deteriorating. In metros like Toledo and Cleveland, home prices have outpaced wage growth, making homeownership increasingly difficult.
In places like Jacksonville and Cape Coral, soaring home insurance premiums and condo HOA fees are pricing out many would-be buyers, causing the share of renters to rise.
Consistent Trends in High-Rental-Share Metros
Despite these shifts, the metros with the highest rental shares remain largely consistent, reflecting long-standing trends in affordability. The most expensive markets, with limited housing supply, tend to have the highest rental share. Meanwhile, more affordable areas with room for new development typically see lower rentership rates and higher homeownership.
Five metros with the largest rental share in Q3 2024:
- San Jose-Sunnyvale-Santa Clara, CA (52.0%)
- Los Angeles-Long Beach-Anaheim, CA (50.8%)
- New York-Newark-Jersey City, NY-NJ-PA (49.1%)
- San Diego-Carlsbad, CA (48.0%)
- Fresno, CA (47.4%)
Five metros with the smallest rental share in Q3 2024:
- Cape Coral-Fort Myers, FL (21.8%)
- Charleston-North Charleston-Summerville, SC (23.7%)
- Columbia, SC (24.5%)
- Allentown-Bethlehem-Easton, PA-NJ (27.2%)
- Detroit-Warren-Dearborn, MI (28.2%)
Share of Local Households that are Renters
Big Picture: As housing affordability conditions worsened over the past few years, the share of renting households has ticked up a bit in some markets, creating opportunities for investors.