Renter households growing far faster than homeowners

America's renter population is growing three times faster than its homeowner population amid affordability struggles, partially thanks to the multifamily construction boom that's limited price gains, a report from Redfin found.

In the second quarter, the number of rental households grew 1.9% year-over-year to a record 45.2 million, the brokerage reported. Homeowner households, in contrast, grew only 0.6% to a record 86.3 million. Both have seen record growth because the U.S. population is at an all-time high, Redfin said. 

Rental households increased at the second-fastest pace since 2021, while the number of homeowner households grew at the slowest pace since 2019. In the first quarter of the year, growth in rental households hit a peak of 2.8%, the largest gain since 2015. 

Renters have formed households faster than owners for three straight quarters partly because homebuying costs have risen much faster than rents, Redfin said. 

​​"The cost of both renting and buying a home has skyrocketed in recent years, but the affordability crunch isn't quite as severe in the rental market. That's because America has been building a lot of apartments to keep pace with robust demand from renters," said Redfin Senior Economist Sheharyar Bokhari. "The country's leaders should heed this lesson when considering how to improve affordability in the homebuying market: When there's more housing to go around, prices don't increase as fast."

The median apartment asking rent increased less than 1% year-over-year in June while the equivalent monthly mortgage payment jumped roughly 5%, Redfin said. Asking rents were 23% above pre-pandemic levels in June, while mortgage payments were a striking 90% above as home prices hit a record high. 

While house prices did decelerate slightly in July, the slower rate of appreciation had yet to spur action from homebuyers who were constrained by affordability limits at the time of Redfin's report.

Even as some sellers re-enter the market, affordability constraints are still present for many potential buyers. Many renters have opted to live in multifamily units while homeownership is out of reach. 

Many renters are still faced with affordability struggles despite rents not increasing as quickly as homebuying costs. In June, the $1,654 median asking rent was the highest since October 2022 and only $46 below the record, Redfin said. Nearly two in five renters don't think they'll ever own a home, according to another report from the brokerage. 

A significant 855,000 renter households have been added over the past year as construction has ramped up, according to Redfin.

New multifamily housing units are being built at an annual rate of 563,000 as of the second quarter, the second-fastest pace recorded by Redfin in over 30 years. The fastest pace was seen in the first quarter of this year. 

A housing shortage still exists, but the recent boom in multifamily construction has helped to narrow the gap. Multifamily building completions are at historic highs since many projects that began during the pandemic housing craze are now finished, Redfin said. 

The current administration has taken action along the same lines, with President Biden recently announcing the Biden-Harris Housing Program that would fund the creation of more affordable housing. 

Multifamily building permits and starts have started to slow overall, which could cause some asking rents to rise again in the coming years, according to Redfin. 

On the other hand, a separate Freddie Mac report recently noted that supply has outpaced demand in some markets, so there could be below-average rent growth and downward pressure on occupancy rates in certain areas.

Nationwide, 34.4%, or just over a third, of households in the U.S. are renter households, a figure that has remained fairly constant over time, Redfin said. The share is much higher in coastal metro areas where it's more expensive to buy a home, such as Los Angeles, which has a rentership rate of 53%.