February
2012
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Perspectives • Retrospectives • Introspectives • Specifications
PNE W S YOU NEED TO HE AR
The Three R’s - Rethink Relocating Renters
Rising demand, Ɵghtening supply, rent rate increases
Most of us have become resigned to viewing the na onal housing market as a complicated picture with a future
that will only become clearer as we move through the recent economic slump. While a few metro areas seem
ready for rebound, the biggest news is what is happening in the residen al rental market. It may be me for your
organiza on to reconsider your reloca on policy’s benefits for your employees who seek to rent in their new job
loca on.
Some staƟsƟcs
Developers have not been building single or mul family rental housing for the past several years due to the
economy, as well as challenges they face in ge ng loans for new projects. A short supply of rental proper es in
many major metropolitan areas has resulted in rising rental rates. According to Reis Inc., rents are at the highest
levels since 2007, with vacancy rates down significantly. Accelerated rental demand preceded the housing bust
due to changing a tudes toward home ownership. The number of renters has risen steadily since 2004, according
to US Census data. There was a net increase of 1.4 million new rental households in 2012 alone. Some experts
are forecas ng an average na onal rental growth of 5.5 percent in 2012, and mul family rents are projected to
rise 3.5 percent in 2013. It should be noted that these forecasts may vary by market. Local economies, and more
par cularly job markets, typically drive local demand.
A number of metro areas are already experiencing double-digit rent growth. Rent increases in high-density, west
coast areas such as San Francisco and San Jose, with 14.8 and 11.7 percent growth respec vely, are not totally
unexpected. Smaller areas are also following that trend. In 2011, lower-cost areas such as Charlo e saw 7.2 percent
rent growth; Denver, with 6.6 percent effec ve rent increases, and Miami with 5.6 percent are surprising examples
of rent cost surges.
According to Local Market Monitor, local economies, especially job availability, will drive local demand for rental
rate increases. Rents are predicted to rise 18 percent in Houston, 15 percent in Grand Rapids, 25 percent in
Rochester, 16 percent in Dallas and 19 percent in Tulsa over the next three years.
Gen Y paƩerns
A recent influx of Genera on Y talent to major urban districts has resulted in a younger, more mobile and urbanoriented workforce. With approximately 77.2 million people, Genera on Y comprises nearly 25 percent of the US
popula on, and has been influencing real estate trends in recent years. The demand for a 24-hour, livable city
model with mul ple or intergenera onal households with access to mass transit could prove to be a game-changer
for the real estate industry.
Other factors affec ng the rental market include renewed growth in the popula on of young people who face
con nued uncertainty regarding their incomes and employment prospects, along with a steadily declining marriage
rate. The decline in home ownership has been led most strongly by household heads under 30 years of age,
according to Freddie Mac.
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PAG E 2
SoluƟons to consider
Many companies seeking to transfer employees in a mely and efficient manner have faced challenges due to
recent difficul es in the housing market. Typical changes have included reloca on policy modifica ons and financial
assistance. Property management benefits may be included to encourage home owning employees to turn the old
home into a rental, thus enabling the reloca ng employee to rent in the new loca on, especially if they are likely to
be relocated again in a rela vely short period of me. Addi onal incen ves include further financial assistance in
either a lump sum form, a percentage of the employee’s salary, a bonus or even some type of rental subsidy.
While such benefits do provide some level of financial assistance, there may be limited value for the reloca ng
employee unable to find available or acceptable rental housing in their new community. It may be me to consider
alterna ve solu ons, as opposed to wai ng for developers and investors to replenish rental inventories.
As a start, consider a core+ op ons approach for your renter’s reloca on policy. Historically, most companies
have defined policies by employee status as a home owner, renter, job tle or level. Today, there are reloca ng
employees that have retained ownership of their home in the old loca on. These employees are forced into a
changed philosophy toward home ownership and must face a new environment as a renter if they accept the
reloca on offered by their employer. At the same me, we have reloca ng employees who are renters by choice,
and may never intend to purchase a home. These individuals will require some common benefits, but may have
reasonable needs specific to their par cular situa on. While this might appear to incur addi onal costs, proac ve
considera on of these issues will ul mately help you control excep ons within your reloca on programs.
Proac ve pre-decision services for both new hires and current employees asked to relocate should be a mandatory
part of your core policy. Such services might include pre-decision counseling, financial assessment assistance,
access to robust online des na on informa on regarding rental data in the new area and, most importantly, a
personalized property tour as part of any area orienta on visit. Of course, it is also important for the reloca ng
employee to explore various websites such as Craigslist.com, Facebook, Twi er and RentVine.com.
Op onal benefits might include considera on of reimbursement or payment of duplicate rental payments, finder’s
fee, and lease breakage. Other op ons currently being u lized are cost-of-living assistance with high-cost rental
payments and even up front security deposits.
Finally, many organiza ons are looking at other ways to reduce the costs associated with reloca on such as shortterm, or rota onal domes c assignments, extended business trips and even commuter programs in mee ng their
strategic needs within the US.
Disclaimer: The informaƟon contained herein is deemed reliable but is not guaranteed and is provided for informaƟonal purposes only. It is not
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©2012 - Lexicon Reloca on, LLC. All rights reserved. Any use of the materials, including reproduc on, modifica on, distribu on or
republica on without the prior wri en consent of Lexicon Reloca on, LLC is strictly prohibited.