Apartment industry executives are cheering the news that, despite increasing levels of homeownership in America, the number of renter households appears to be increasing even faster. And, of even more importance to apartment officials, the increases are most significantly being noted among people who could afford homes, but choose not to.
New data released by the Census Bureau shows that the number of apartment households grew between March 1998 and March 1999. The number of apartment renters (in buildings with five or more units) grew 2.2 percent, compared to a 1.4 percent gain in the total number of households in the country.
"Many of these new renters come from high-income households," said a spokesman for the Washington-based National Multi Housing Council.
"As was the case last year, the 1999 (Current Population Survey) reports the fastest growing segment of the apartment market was households earning $50,000 or more, which increased 11.6 percent in number and 4.7 percent even after adjusting for inflation."
NMHC President Jonathan Kempner said demographics and changing lifestyles are fueling the increase in apartment demand.
"The Census Bureau is projecting a boom in the population groups most likely to choose an apartment - young adults, one-person households and married couples without children. For many of these households, apartments offer a lifestyle better suited to their needs by combining convenience and amenities, particularly in the area of telecommunications, often not available or affordable in single-family housing. They provide residents with he flexibility to respond to job and lifestyle changes."
Industry leaders point to a combination of factors as leading to the increase in upper-income homerentership, but none so important as the new tax laws.
Said Housing Council Economist Jack Goodman, "Tax law changes passed in 1997 have caused many Americans to question the assumption that owning a home is better from an economic standpoint than renting."
Goodman points out that under the law, the first $500,000 of capital gains on homes sold by joint filers ($250,000 for single filers) are now exempt from taxes.
"Freed from the prospect of incurring a huge tax liability, homeowners today have far more options in deciding where to live and many, particularly empty nesters, are choosing to leave cutting the grass, repairing the furnace and paying property taxes behind in favor of renting," Goodman said.
"Having paid down their mortgages, many members of this group are now able to reallocate their wealth completely tax free - into a broader array of investments."
Kempner said the number of home renters would continue to rise.
"The number of households trading large suburban homes and yards for an apartment within walking distance to shops and entertainment will increase," he predicted. For more Apartment News, Click Here
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