Why Renters Are Ending Up in the Suburbs
citylab.com /housing/2014/06/why-renters-are-ending-up-in-the-suburbs/372430/
Kriston Capps
Most new homes being built in the U.S. are multifamily apartments, but more and more people are opting
for an even cheaper rental option: the traditional suburban single-family home.
A rental home owned by Blackstone in Riverside, California. (Mike Blake/Reuters)
Something doesn't quite square up between U.S. housing data and what we know about the changing
demographics of U.S. metro areas. As Census Bureau data show, growth in cities is tilting ever so slightly
back toward the suburbs. Yet multifamily housing, mostly situated in urban centers, is still driving the
American housing market. Are developers out of step with demand?
Between 2010 and 2013, several U.S. cities saw more growth than they did over the entire course of the
decade between 2000 and 2010. As the Brookings Institution's William H. Frey has reported, cities with
populations greater than 250,000 are showing growth rates of slightly more than 1 percent,
much higher than the average growth rate for the previous decade.
In McKinney and other fast-growing suburbs and exurbs, rentals are the major force driving growth—just
not multifamily rentals.
Yet the Census data also show that this growth rate is falling—albeit marginally. San Marcos, Cedar Park,
and Georgetown, all three of them Austin suburbs of about 50,000, are the fastest growing cities in the
country. While urban growth still outpaces suburban growth, Frey acknowledges that "the new numbers for
2012–13... suggest a closing of the city-suburb growth gap with the small downtick in city growth and an
even tinier suburban growth uptick."
Even though suburban growth is catching up, the multifamily housing boom that has characterized
explosive growth in center cities for the last several years is still driving the economy. With winter finally
behind us, permits for new housing grew 8 percent in April; construction on new housing jumped
a full 13 percent. Most of these new homes come in the form of apartment units. In April, there were 2,000
new permits for single-family homes versus 81,000 new permits for multifamily units. Housings starts
showed the same wide divide: 5,000 new single-family homes versus 124,000 new multifamily units.
But few of those multifamily units are being built in McKinney, Texas—a Dallas exurb that is one of the
fastest-growing places in the nation. What explains the mismatch between the kinds of new homes we're
building and the places where we're moving?
In McKinney and other fast-growing suburbs and exurbs, rentals are the major force driving growth—just
not multifamily rentals. Abundant stock left over from the single-family housing boom whose bust fueled the
Great Recession are being opened to a new generation of suburban renters by major private-equity firms
such as the Blackstone Group.
This transformation of the suburbs is a new and not-altogether-welcome development. The single-family
homes being bought up, rehabilitated, and then rented out again by investment units such as the
Blackstone Group's Invitation Homes——
are leftovers from a housing boom characterized by cheap construction and easy credit. The conversion of
unsold or foreclosed single-family homes creates fewer jobs than new construction. From an urbanist
perspective, single-family home rentals come with all the drawbacks of large-plot suburban development
and none of the benefits.
Some are bullish that the surge in multifamily construction in America's growing urban centers was always
inevitably going to return apartment dwellers to the suburbs, once they outgrew their apartments. At
Forbes, Bill Conerly sums up his prediction this way: "When the current crop of young adults get married
and has kids, and the kids grow beyond toddling to full-blown running, I suspect that the young parents will
start looking for a house."
It's rather the case that the appetite for rental housing, which traditionally takes the form of multifamily
housing, is transforming the suburbs and its traditionally single-family homes. With affordable housing
harder and harder to find in places such as Austin, New York, and Washington, D.C., renters are finding
themselves in the suburbs in the single-family homes built for the last boom. Developers are retrofitting the
financial reality of the suburbs—from ownership to rental societies—without changing the suburban home
whatsoever.