Market Outlook

Why Population Growth in the Suburbs is Outpacing City Growth

May 31, 2018

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Population Growth In The Suburbs Is Outpacing City Growth

During the late nineteenth century, many Americans flocked to cities in search of factory work. In the postwar era of the 1940s-1950s, this trend was reversed. Because of low housing costs and GI Bill benefits, even working class Americans found that they could afford to own homes in the suburbs and pursue “The American Dream”. Then, in 2008, the housing market collapsed. The “dream” suddenly became less tangible and, as a result, suburban growth slowed as more and more people turned to rentals, and, in particular, urban living.

Now, however, the tables have turned again, and growth in the suburbs is outpacing city growth. Recent data taken from the Census shows that during 2015-2016, the growth rate in suburbs (.89%) began to again outpace cities (.82%). What’s more, it is estimated that nearly two thirds of the nation’s largest cities showed a drop off in growth during the last year. Although these patterns do not necessarily imply the end of city attractiveness, they signal that the shift to cities that has occurred over the last ten years may finally be coming to an end. As a landlord, it’s important to dig deeper than general housing trends and understand why they’re occurring. Below are several reasons renters and home buyers are turning towards the suburbs.

Suburban Living is a Better Deal

As urban development patterns continue to change, the choice between suburban and urban living comes with a variety of new considerations. One of the most critical factors is cost. It’s no surprise that cities tend to have higher rents than suburban areas. On average, city living will cost a tenant an additional 41% over suburban living. In real dollars, this amounts to an extra $578 per month and $6,936 per year – no small sum.

If you’re a parent deciding where to raise your family, the price for an urban home is even higher. According to a 2017 Cost of Living Report focused exclusively on the financial burdens of childcare and housing, it will cost the average U.S family about $16,010 more per year to live in the city, a tremendous increase.

You Get More Square Footage for Less Money

As a real estate investor looking to purchase properties to be rented, it’s important to keep in mind where your potential tenant places value. Following a three-year study intended to better understand the preferences and needs of homebuyers and renters, Crescent Communities, a homebuilding company, concluded that one of the primary concerns for potential residents is the amount of living space available.

Outside of the crowded urban core, there’s a lot more space and square footage available for a lot less money. On average, a home in the city costs nearly twice as much as a home of equal size in the suburbs. For example, the median price per square foot for a home in a suburb just outside of Washington D.C is $248. In the heart of Washington D.C., the cost rises to $432 per square foot. Advantage: suburbs.

City Amenities Are Within Reach

As the population in suburbs has grown, so have the selection of amenities. Unlike the generation before them, Millennials are looking for suburbs with the positive perks associated with downtown living. Think yoga classes, health food stores, and walkable streets that are close to parks and natural reserves. They also don’t want long commutes or to feel isolated – they want to be part of a community.

In other words, people still want the urban amenities without the associated costs. In the past, this has been a challenge, but things are changing. From entertainment venues to organic markets, “New Urbanism” is bringing more options and variety to suburban residents. The basic principles of New Urbanism in use today include things like: Walkability (most critical amenities should be within a 10-minute stroll), Connectivity (interconnected street grid networks to disperse traffic and ease walking), Mixed Use and Diversity (a mix of shops, offices, apartments and homes on-site), and Mixed housing (a range of type, sizes and prices in closer proximity). These principles can all be applied to projects ranging from a single building to an entire community and give modern renters exactly what they’re looking for in a suburban setting.

Telecommunication – People Don’t Work Downtown

Many people consider a commute a given part of the workday; however, not all jobs require a commute, nor are they located in city centers. With the technology available to us today, more and more people are working from home.  According to a Gallup Survey of 15,000 adults, a greater number American employees are working remotely, and they are doing so for longer periods. Last year, 43 percent of Americans said they spent at least some time working from home, representing a four percentage point increase since 2012. And it’s not just that more Americans are working off-site; they’re doing so more often, too. The “no commute” advantage once enjoyed by city living is quickly evaporating.

There’s More Yard Space for Dogs

Millennials are now leading the pack of home renters, so it’s not shocking to hear that one of the main drivers motivating people to move to the suburbs today is their dogs. A recent survey found that 33 percent of millennial home renters’ decision to buy a home was driven solely by their little buddy. Pets even outranked marriage and kids as a motivator for renting a home by 8 and 14 percent respectively. Many Millennials claim that living in the city doesn’t provide their furry friend with the space they deserve, and as a result are migrating to the suburbs.  This is also all the more reason why it’s necessary to keep the value of pets to your tenants in mind when deciding whether to allow them your rental properties.

Clearly, there’s a lot to be considered when deciding where to live. However, being aware of the factors that are contributing to faster population growth in the suburbs can help you cater to your tenants needs more effectively, stay on top of current market trends, and expand your rental business.


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