SEATTLE—For apartment renters, it can literally pay to renew their existing leases. Zillow said Friday that market-rate rents increased at a faster pace year over year than did rents for tenants who renewed. The firm analyzed 2015 rent data from the US Census American Community Survey, the most recent data available.
The Y-O-Y increase for renters who renewed in ’15 was 3.6%, compared to a 5.6% rise in rent for beginning a new lease. Dollar-wise, that means a renter who had moved in the past year paid an average of $329 more each month than a renter who had lived in the same place for five years or longer.
In some markets, the gap was even greater. Zillow estimates that Bostonians who stayed in the same rental for five or more years saved as much as 86%, which translated to $8,979 in annual rent payments over the five-year period.
Boston renters also faced the biggest difference between annual market rate rent increases (10.5%) and rent increases for renewing (4.3%). Not far behind in terms of the dollar amount was San Francisco, where renters saved an average of $8,860 over five years for staying in place.
On a percentage basis, the market-rate increases were highest in San Francisco at 12.9% and in Denver at 14.1%. Renters in the New York/New Jersey metro area saved $7,376 during the five-year period by renewing, although on a percentage basis the gap between market rate and renewing was close to the national average.
The number of renter households across the US has risen by four million over the past five years to reach 43 million, Zillow says. The majority of recent household formation occurred on the renter side rather than on the homeowner side, due partly to Millennials reaching the age to move out but not having enough savings to buy a home.
Young adults are also renting longer than ever before buying, says Zillow. The savings of renewing in place could be put toward a down payment on a home, seen as the biggest obstacle toward buying, the firm says.
“Renters have a decision to make almost every year: do they stay in the same place, or should they look for a new unit?” says Svenja Gudell, chief economist at Zillow. “With the country in the middle of an affordability crisis, it’s important for renters to understand how much they can save if they renew their lease instead of finding a new rental.
“Nationally, rental rates have slowed and the savings from renewing are not as significant for renters today,” Gudell continues. “However, in some of the hottest rental markets, where rents are still rising aggressively, continually renewing a lease can mean saving thousands of dollars.”
In related news, Apartment List said Friday that rents nationally grew .05% during June, with 92 of the 100 largest US cities posting Y-O-Y growth. June’s increase over May levels was in line with the monthly growth that the firm has seen over the course of 2017.
Nationally, Y-O-Y growth now stands at 2.9%, surpassing the 2.6% annual in the year-ago period. Apartment List notes that the last month in which year-over-year growth outpaced the level from the year prior was December ‘15, although Y-O-Y growth still lags the 3.5% pace seen in June ‘15.