What is lifestyle renting? The latest rental market trend that property owners need to know about

Owning a home is still a sign of the American dream, right? Well, not so fast. A growing number of renters are happy to stick with their rentals, 84% think it’s more affordable than owning a home and 66% are satisfied with their rental experience.

What is lifestyle renting?

These content renters might have been homebuyers a generation ago. But now, they’re part of a group willing to postpone or abandon homeownership in exchange for some of the flexibility and benefits of high-end amenity-rich luxury rental properties. This trend is called lifestyle renting, and it’s gaining popularity, especially among millennials.

What is the typical demographic of a lifestyle renter?

Lifestyle renters typically have above-average incomes, which may have allowed them to buy a home in the past. However, today, many are getting priced out of their local real estate market. At the same time, some prefer renting in upscale communities instead of saving for a down payment and dealing with homeownership expenses. While there’s no single big reason why lifestyle renters are growing, multiple contributing factors do exist.

These range from a general lack of inventory in the real estate market, rising housing prices, the availability of luxury rentals, and, of course, the pandemic. Combined, it means an increasing number of people, especially those with higher incomes, are choosing to rent instead of buy. For larger investors and property developers, the growth of lifestyle renting may be an opportunity to keep an eye on, especially in a few key markets in the South and West.

Shifting landscapes in the real estate market drive lifestyle renting

Although the pandemic helped drive a housing boom, home prices have been steadily on the rise for decades. In 2012, the median price of a home was approximately $240,000. At the end of 2021, it was just under $405,000. While housing prices have risen, so have mortgages. According to a recent report, from December 2020 to December 2021, the median monthly mortgage payment for buyers who put 5% down increased by 22%. 

Coupled with rising housing prices are housing shortages, especially for entry-level single-family homes. As of late 2021, the National Association of Realtors estimates a 5.2 million home gap in single-family home construction across the country. Fewer available starter homes and higher prices means more people are continuing to rent.

Working from home also skyrocketed during the pandemic. And for many, it is here to stay.  A 2022 NMHC/Grace Hill Renter Preferences Survey on the Future of Renting found 64% of respondents expected to work remotely this year as they had in the past. Many will remain 100% remote or work on a hybrid system where they may be in the office two or three days of the week. 

These increasing prices and competition for houses have impacted some would-be homeowners who could afford to buy. And for others, the ability to work from home has opened up the opportunity to try living in a new place without worrying about buying. So, for now, they’re sticking with rentals. As a result, the number of millennial rental applicants with incomes over $50,000 applying to live in upscale or luxury apartment communities has grown from 28% in 2017 to 43% in 2021.

For these lifestyle renters, renting in upscale apartment communities in smaller, more affordable cities means getting the luxury amenities they want in their homes that they may not be able to afford otherwise.

Lifestyle renters want more amenities

For many, renting is a lifestyle choice. Renting isn’t something they have to do until they can afford to buy a home. Instead, these renters prefer the benefits that come with living in a luxury rental — there’s no maintenance, shoveling, or lawncare. It goes beyond millennials, too. Boomers and empty nesters wanting to downsize are looking for places to live closer to suburban-urban areas with things to do. While Gen X renters may want to reduce commutes or have the option of living in a more affordable area and working remotely.

If anything unifies lifestyle renters, it’s their desire for technologically advanced apartments with a lot of luxury amenities. A doorman or a swimming pool may not cut it anymore for many renters. Instead, these renters want a full suite of amenities, including:

• Smart home technology: Nearly 70% of renters want smart thermostats as well as other innovative technology such as leak detection systems and water-saving features that they can control and get alerts from via apps. 

• Package systems: Package deliveries were up 27% in 2020 over the previous year. Now renters want package lockers and storage solutions, including secure rooms and cold storage for groceries and other perishables. 

• Wi-Fi: Renters want seamless connectivity in their homes, including reliable cell phone service and high-speed internet. Developers may consider community-managed Wi-Fi as one increasingly popular amenity.

• Security: Security-focused tech amenities like smart locks, package lockers, and video entry systems can help renters feel safer. And smart entry systems allow renters to control who gets in and out of their units.

• Fitness centers: 70% of renters say they are interested in on-site fitness centers. Coupled with that is an increasing interest in outdoor or community-focused fitness areas such as outdoor spaces for yoga classes.

• Air quality: Indoor air quality has been a growing concern for many renters, and the pandemic may have kicked it into high gear. Now 71% say they are interested in indoor air quality, and 65% look for healthy building certifications.

• Larger units: Renters today want larger units with built-in amenities, including dedicated workspaces and private outdoor spaces like patios and balconies.

A report from PWC on emerging trends in real estate for 2022 sums it up well, “People want that 15-minute lifestyle if they can get it. They want walkable, amenitized, real places that allow them to live fuller lives without having to get into a car and transition from one segment of their life to another.”

What does lifestyle renting mean for investors and developers?

For those building upscale and luxury rental units, something to watch is where lifestyle renters are popping up. On the millennial side, many of these renters are looking to get more for their money, living in smaller or growing cities where they can sign a lease for a fraction of the cost of home ownership — even with rising rents.

Trends show that metro areas in the Sunbelt are where there has been the most significant increase in multifamily demand. A PWC report found for investors, new markets are emerging with this new shift, including:

• Nashville

• Raleigh/Durham

• Phoenix

• Austin

• Tampa/St. Petersburg

• Charlotte

• Dallas/Fort Worth

• Atlanta

• Seattle

• Boston

More affordable pricing is driving the surge of lifestyle renters in these locations, but it’s also the growth of jobs. The National Association of Realtors looked at 401 metro areas and found that 135 markets, about a third, have more net jobs in November 2021 than February 2020. These areas include:

• Salt Lake City, Utah

• Tampa-St. Petersburg metro area, Florida

• Jacksonville, Florida

• San Antonio, Texas

• Fayetteville, Arkansas

• Savannah, Georgia

• Raleigh, North Carolina

• Kansas City, Missouri

• Baltimore, Maryland

If the pandemic has taught us anything it’s that the rental market is resilient. Year over year, rents are up on average 14% across the country. Some places, like Florida, have seen increases of upwards of 20%, while Austin’s has risen by 40%. That may indicate a signal for more rental construction in these markets as more lifestyle renters move these locations and are willing to pay for amenities-rich high-end rentals.  Since the need for tech and amenities are a big driver behind the demand, current property developers may want to look at existing units and see where adding new features may attract lifestyle renters. Add in smart technology, package lockers, and door security while ensuring high-speed Wi-Fi is available. As markets in the Sunbelt and West are seen as new hot spots for lifestyle renters, there's an opportunity for new amenity-rich developments to meet the increasing demand.

Rhino reduces costs for lifestyle renters while maximizing your coverage

As lifestyle renters seek homes that provide them with the most comfortable and convenient luxuries, financial flexibility is something that is at the forefront of their minds. Especially with inflation soaring in 2022, lifestyle renters are looking for ways to save without sacrificing the amenities value. That's where Rhino's security deposit insurance provides a valuable differentiator for your properties: renters save over 90% on average when moving into a new home, and you can customize your homes' coverage up to 6x monthly rent. Rhino's low-cost insurance policy replaces a traditional deposit, saving your renters money and removing the hassle of processing deposits while mitigating bad debt. Request a free demo here to learn more about using Rhino to mutually benefit your team and your renters.

Jessica White

Jessica White is a senior writer at Rhino who considers herself a queen of small victories. She believes that every renter’s biggest win is kicking cash deposits to the curb.