The New Rental Housing Market
By Don Bailey
With the collapse of the housing market and a 33 percent drop in home values since 2006, it’s not surprising that Americans are increasingly delaying homeownership and choosing instead to rent. With 29 percent of the U.S. population already renting – an 18 percent increase since 2007 – and more to come, the traditional “American Dream” of home ownership is quickly morphing into a preference for the flexibility that renting affords.
This trend is expected to continue as mortgage requirements tighten and foreclosures are anticipated to drive an additional 3 million homeowners to rent over the next few years. Yet, with the economy driving an increase of renters into the marketplace, you’d expect renters to protect their household all the same. Unfortunately, this isn’t the case as a majority of renters are without renter’s insurance.
In the late 1990s and early 2000s, lower unemployment rates and mortgages that required little or nothing down made buying a home an easily achievable reality. American families could have their 2.5 children, minivan and the white picket fence.
With the meltdown of the housing markets in late 2007, which set off the nation’s worst economic downturn since the Great Depression, Americans’ reality changed, and so too did their definition of this fundamental precept within the American Dream. In the aftermath of the housing market crash, the state of the U.S. housing market quickly shifted, lending standards tightened and the majority of Americans were left looking to rent versus buy.
Today, even with low interest rates, this trend continues. Single-family home construction hit a record low in 2011, and homebuilders are just now replenishing their inventory. Furthermore many homeowners remain underwater and are hesitant to sell properties at levels below their original purchase price. Over the next ten years, population growth alone is expected to increase the number of renter households by more than 3.6 million. The sheer size of the baby-boom generation will also push up the number of renters over the age of 65 by nearly 2 million given rentership rates tend to rise among elderly households.
Going forward, renters will increasingly be single persons, single-parent families, unmarried partners and unrelated roommates. Minorities and immigrants are also expected to account for a growing share of these newly formed households – from 2001 to 2010 they contributed more than three quarters of the 3.9 million new renter households.
The shift towards renting is clear. Nevertheless, an alarming majority of renters are not protecting their personal property.
More than half of renters put themselves at risk by not protecting their home in the same capacity that car owners and homeowners do. And while three-quarters of renters have auto insurance, renters insurance is overlooked. Common excuses include “it’s too expensive” or “the landlord has it covered”, and yet, about half of Americans who rent say their belongings are worth more than $30,000. Awareness is particularly low among minority groups – only 12 percent of Hispanic renters have renters insurance primarily due to a lack of product awareness.
As renters’ dreams and their physical property may be lost without coverage, it is core to who Allstate is as a company to share this information and help consumers protect and prepare for their futures.
At Allstate, the four most common risks that we cover are theft, fire and smoke, vandalism and water damage. We also protect tenants from additional types of liability, including guest medical, which could lead to expensive medical bills or even a lawsuit, should someone get injured on your property.
Renters should be aware of their buildings’ policies as they may not cover personal belongings. Although some renters may see it as an unnecessary expense, those who end up needing to use it are always grateful they had it.
A pipe bursts. A spark ignites a blaze. Thieves break in. Catastrophes don’t discriminate between owners and renters. Isn’t the new American Dream worth protecting?