Increasing Student Loan Debt May Drive Apartment Demand

Outstanding student loan debt reached $1.08 trillion at the end of 2013—up from $364 billion in 2005, as reported by the Federal Reserve Bank of New York. Now, almost half of all 25-year-olds have some student debt. With student loan debt increasing significantly during the past decade, the population of renters by necessity will likely expand in coming years.

High debt loads can be a huge impediment to homeownership, as they can impair a borrower’s access to mortgage credit and limit his or her ability to save for a down payment. This is further exacerbated by the higher debt-to-income borrowing requirements under the Dodd-Frank act.

In addition, many are renting by choice due to the flexibility of lease terms and to avoid the financial burden and time costs of buying or selling a home. Apartments also tend to be more concentrated in urban areas that offer the live/work/play environments increasingly preferred by young adults today.

These two trends coupled together will likely push out the traditional household formation age and drive apartment demand. When renters by necessity mature or start families, they may turn to suburban apartments that offer amenities comparable with those featured in single-family homes, such as pools, playgrounds, dog parks, community gardens, barbecue stations, and ample green space.

Read more on the student debt here: MarketWatch