In October 2020, the Bureau of Labor Statistics (BLS) added two questions about housing leases to the survey used to determine the consumer price index (CPI). The questions asked about the origination date of the lease and its length. The BLS recently issued a report analyzing this data.
A consideration when viewing this data is that the BLS does not distinguish between single-family and multifamily rental housing. The most recent data from the Census Bureau indicates that 37.4 percent of rental housing units are single-family and that only 45.3 percent of rental housing units are in buildings with more than 5 units.
The “standard” lease term
While 12 months may be the most common lease term, the survey found that 12-month leases comprised only about 60 percent of the total. Nearly 32 percent of housing leases were month-to-month.
Other lease terms comprised relatively few leases. For example, 24-month leases represented 2.6 percent of the total, 13-month leases were 1.3 percent and 6-month leases were 1.1 percent. No other lease term represented more than 1 percent of total housing leases.
The BLS looked at the portion of housing leases that are month-to-month by state and found wide variation. The report identifies 8 states plus the District of Columbia where month-to-month leases represent 43 percent or more of housing leases. These states were as disparate as California (62.7 percent month-to-month) and Arkansas (57.1 percent month-to-month).
By contrast, the report also identified 5 states where month-to-month leases represented less than 16 percent of total housing leases. Colorado leads this list with only 7.1 percent of housing leases month-to-month. It is followed by Georgia, Florida, Illinois and Missouri.
The reported indicated that insufficient data had been collected in order to quote the share of month-to-month housing leases for 14 states.
An interesting observation in the report is that, the longer the resident has occupied their unit, the less likely they are to have a 12-month lease rather than a month-to-month lease. Residents who have been in their units less than one year are 9 times more likely to have a 12-month lease than a month-to-month lease. Residents who have been in their units over 5 years are slightly more likely to have a month-to-month lease than a 12-month lease.
The leasing season struggle is real
The seasonal nature of rent growth trends has been well documented with rents rising in the spring, peaking in August and falling late in the year. Data in the BLS report regarding housing lease origination dates follows the same pattern. The months with the highest numbers of lease originations are June, July and August, with August seeing 10.6 percent of all housing lease originations. December sees the lowest number of lease originations at 6.3 percent, followed by November and February at 6.8 percent.
The report also looks at how rent increases differ for units where the resident remains the same compared to units where a new resident moves in. Rent increases were much more likely for new residents (76 percent saw an increase) than when the resident remained the same (54 percent saw an increase).
The size of the rent increase was also larger for new residents. Compared to 6 months earlier, rents increased by 12.2 percent in the first half of 2022 for new residents. For existing residents who had signed a new housing lease within the prior 6 months, rents were up by only 3.5 percent on average.
The full BLS report is available here.