The prime renter age group of 20-34 also happens to roughly parallel the age of the millennial generation. Millennials recently passed the baby boomers as the largest generation by population in the U.S. As seen in the population pyramid graphics below, the 20-34-year old population (or prime renter group) comprised 20.8% of the U.S. population in 2017, or about 67.9 million people.
With the prime renter group’s population growing by almost 6.7 million in the past 10 years, it’s easy to understand at least one reason for strong apartment market performance. By comparison, the prime renter age group gained 1.5 million people from 1997-2007 but had a slightly lower percentage of the total population (20.4%). Interestingly, 1997’s prime renter share of the population was higher at 22.0%, as it included some members of the baby boomer generation.
Looking forward 10 years, U.S. population projections from the Population Division of the United Nations’ Department of Economic and Social Affairs show that the prime renter age group is not expected to change very much from current levels. In fact, there is only a slight decrease of about -32,300, with a decrease in the share of total population to 19.4%.
What does this mean for the apartment industry? Should we stop building new apartments if the population in the prime renter age group remains about the same? Of course not. First, there will always be a need to replace a portion of our aging apartment inventory. Natural disasters such as floods, fires, hurricanes, tornadoes and earthquakes will destroy some units, too. But more importantly, at least in the short term, there has been somewhat of a structural shift toward renting in the minds of many, which will boost apartment market performance.
In addition to the propensity to rent among the prime renter age group (which has been pretty consistent over the years), a portion of the population that may have lost homes because of the Great Recession or is renting as a lifestyle choice due to downsizing or urbanization will continue to create demand for more apartments. Coupled with the difficulties facing those wishing to buy a home (of any age group or generation), and the outlook for apartment market performance is generally good for several more years.