Market rate rents – those that are advertised for new renters – increased more than rents did for tenants who renewed leases. The annual market rate increase in rent from 2014 to 2015 was 5.6 percent, compared to a 3.6 percent increase for renewed leases.
Relatively flat wages in combination with skyrocketing rent have caused a rental affordability crisis. Research conducted by Zillow shows rents can save significant money by renewing leases rather than taking out a new one, when rents are rising rapidly. These savings can be used for a down payment, identified as the greatest barrier to owning a home, by current renters.
Renter households have increased across the country to about 43 million, about 4 million more than there were five years ago. This is due in part due to millennials reaching the age to move out but not having enough savings to buy a home, causing most of the growth of newly established households to be on the rental side and not the home ownership side. Young adults are also renting for much longer periods of time before making the decision to buy a home.
"Renters have a decision to make almost every year – do they stay in the same place, or should they look for a new unit?" said Zillow Chief Economist Dr. Svenja Gudell. "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. 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 Boston in particular, renters saved up to 86 percent by staying in the same rental for five or more years, which translated to $8,979 in annual rent payments. They also had the biggest difference between annual market rate rent increases – 10.5 percent – and rent increases for renewing – 4.3 percent.
On the flip side, renters in Las Vegas had the smallest difference between annual market rate rent increases and rent increases for renewing. Renters who have lived in the same unit for five or more years paid on average $842 less per year than renters who moved the year before.