The Impact of Housing Trends on Landlords

The “American Dream” used to mean buying a home. But after a recession and housing market crash in which many people lost their homes to foreclosure, consumers are more cautious about investing in a home. As a result, demand for single-family rental homes is on the rise.

An increase in demand means costs are increasing, too. The cost of single-family home rentals has increased 30 percent in the past three years – that’s good news for landlords and for investors who are able to buy homes and convert them into rentals. But there may be some downsides to this housing trend, too.

How Renting Preferences Affect Landlords

Young adults are less inclined than previous generations to buy a home. According to Rent Cafe, however, the “biggest game changers” in renting are people older than 55. Between 2009 and 2015, this age group accounted for a 28 percent increase in the renting population, whereas renters age 34 and younger accounted for only a 3 percent increase in the renting population.

Renters older than 55 tend to be highly educated, with no minor children. Many are opting to “downsize,” by selling their family home and moving to a smaller rental home in the suburbs.

Landlords that own only multi-family dwellings in urban areas may find their renter demographics are shifting younger, and demand for apartments could lag behind demand for single-family rental homes. Because younger renters are cautious about buying a home and making big financial commitments, they’re also putting off having a family. So younger renters may be more interested in finding small apartments, rather than units with two or three bedrooms.

Older renters will likely continue driving demand for single-family homes, so landlords in that market could see significant financial gains.

Investment Firms May Put Pressure on Independent Landlords

New York investor The Steinbridge Group plans to spend $425 million on single-family homes over the next few years and rent them out long-term. The group is targeting cities in Maryland and other Northeastern states, with a goal of keeping rents affordable for tenants who want to live in or near urban areas.

In Philadelphia, Steinbridge properties rent for $700 to $1,200, which Steinbridge CEO Tawan Davis says is “hundreds of dollars less than what smaller owners can make profitable.” Once Steinbridge enters Maryland markets, landlords may have difficulty attracting tenants, if they can’t compete with Steinbridge’s rents.

An Evolving Marketplace

Being a landlord comes with its ups and downs. Fluctuations in the market, maintenance costs, and tax and regulatory changes can have a big impact on revenue. But with careful planning, landlords may be able to weather temporary downturns.

Lusk Law, LLC, specializes in assisting landlords, helping to avoid litigation when possible, and we’re ready to actively represent our clients in court when litigation is necessary. Our experienced landlord and tenant law attorneys have provided legal counsel and representation in Frederick County, Howard County, Baltimore County, Baltimore City, Carroll County, Washington County, Montgomery County, Anne Arundel County, and other counties in Maryland. With over a decade of experience in representing landlords, we’re ready to offer a consultation concerning your rights. Please call us at 443-535-9715 or fill out our contact form if you have any questions about this topic.

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