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Owner vs. tenant: Fiction, fact and future outlook

Colliers PULS Q3 2021

Tapping into detailed research data, we take our very first dive into the actual differences determining risk and return on newly built residential property in various size towns and cities across Denmark.

“Do you live in rented accommodation? Why, then you don’t get to save up.”

This is typically how a recurring discussion with friends and relatives may start – or end – when the conversation turns to your housing situation. And maybe, they have a point.

Young people typically enter the housing market as tenants. Later on in life, when earnings have increased as have savings, many would like to own their home.

The size of your wallet is therefore naturally correlated with your residential status in the sense that owners on average outrank tenants on the socioeconomic ladder.

However, does that also apply when you compare owners of newly built owner-occupied apartments with tenants of newly built rental apartments? And what is the situation like across towns and cities?

In this article, our Head of Research, who holds a PhD in Economics from the Univer-sity of Copenhagen, analyses detailed research data on Danish housing and residents to confirm or deny certain notions as to what set owners and tenants apart.

Along the way, we will learn more about which factors to keep a keen eye on if you want to succeed as developer or investor in a red-hot and sought-after residential market.

In the following, we zoom in on some characteristics that define owners and tenants respectively. Our focus is on newly built apartment blocks, that is, on the 7,252 families that reside in owner-occupied apart-ments built in 2010-2019 and the 45,144 families that reside in private rental apart-ments built in 2010-2019.

Substantial income gap
Households residing in ownership housing have a median net income twice the size of that of households living in rented housing, namely DKK 520,000 against DKK 230,000.

This marked income gap between owners and tenants may partly be explained by a predominance of singles in the tenant segment, namely 67% of tenants, whereas singles account for only 35% of the owner segment.

This means that tenant households include a larger share of single-income house-holds. In addition, the average age of tenants is 34 years whereas it is 51 for owners. The low average age of tenants helps to explain their lower income levels as income typically increases as you grow older and gain work experience.


Figure 1 shows household incomes after tax, also called net income, for owners and tenants, respectively. The broken lines indicate median net incomes across various size towns and cities.

The figure also shows a strong positive correlation between the net income of ownership households and the size of the town or city they live in. The median net income of ownership households in towns with less than 10,000 inhabitants is approx DKK 300,000 whereas ownership households in Greater Copenhagen have DKK 610,000 at their disposal.

Owner-occupied apartments in major towns and cities therefore attract families in higher income brackets than owner-occupied apartments in smaller towns.

This correlation does not apply to families that live in rented accommodation. Here the average income is fairly constant across various size towns and cities.

Professional players in the market for multistorey apartment buildings do well to take into account how the tenure and geographical location of apartments correlate with the income levels of residents.

In addition, it is remarkable that the income of ownership house-holds in towns with less than 10,000 inhabitants is more aligned with the income of tenant households in towns of a similar size than with the income levels of owner-ship households in other size towns and cities. 

Education follows the city, not type of housing
How does the educational level of owners differ from that of tenants in the five size brackets of towns and cities?

Households’ educational level is calculated as the total official duration of the highest completed educational programme. For instance, if the highest completed education is a high-school diploma (A-levels), it corresponds to 13 years of education, and a bachelor’s degree corresponds to 16 years.

Figure 2 shows that the average educational level increases proportionate to the size of the town or city, and that owners have completed longer educations than tenants across all size towns and cities.

Owners have 15.5 years of education on average, whereas tenants have 14.6 years on average. Like income levels, the average educa-tional level of owners hardly differs from that of tenants in towns and cities with less than 10,000 inhabitants.

The notion that there is a sharp distinguishing line between owners and tenants is therefore fictitious. Both in terms of education and income, owners in towns and cities with less than 10,000 inhabitants have more in common with tenants in the same size town than with owners in other size towns and cities.

In conclusion, there is no clear-cut “owner type”, nor any clear-cut “tenant type”. However, the size of a town or city has great bearing on the socioeconomic status of its residents.


Tenants’ coffers are empty
In terms of ready money for tenants and owners to spend, there are substantial differences, with owners better bolstered if their Toyota breaks down or if they incur any other unforeseen expenses.

For families living in ownership housing, the amount of savings (liquid funds) are almost seven times the amount of savings in families that are tenants.

The median savings of owners are DKK 400,000, whereas tenants have to make do with DKK 60,000. This is to be expected. As owner you have greater financial obligations, e.g. if the roof is in need of repair. As tenant you are in many instances able to solve the problem merely by contacting your landlord.

A smaller buffer is therefore required of the tenant. Moreover, a natural selection process kicks in when the dream of owning a home is to be turned into reality: Only families with sufficient savings qualify for a mortgage to buy ownership housing.

Like income, the fact that tenant households have lower savings than ownership households ties in with the generally younger age of tenants and that they are more prone to be singles.

Nevertheless, it is remarkable that many tenants have so limited contingency funds. When we take a closer look at the figures, it turns out that a fourth of Greater Copenhagen tenants have less than DKK 15,000 in liquid assets, and the tenth of tenants with the very smallest savings have less than DKK 3,000. In towns and cities outside Greater Copenhagen with at least 100,000 inhabitants the corresponding figures are DKK 20,000 and DKK 8,000.

This suggests that a considerable portion of tenants in major towns and cities have high cost levels relative to their income levels. Seeing that so many tenants so to speak live from hand to mouth, they will e.g. be unable to put up the deposit/prepaid rent for another rental apartment without procuring financing.

But one of the ad-vantages of renting as opposed to owning accommodation is exactly the flexibility that comes with the option of a quick and easy relocation.

Without a sufficient financial buffer, tenants are unable to take advantage of this flexibility, and they are at the same time susceptible to detrimental shocks to their household finances such as unemployment or rental increases.

Figur_3_Graf_Q3_likvide aktiver_UK_OUT
Tenants take up less space
Ownership households take up more space on average than tenant households. This may well make sense as ownership households more often tend to be couples and have children living at home. The average ownership household therefore has more members than tenant households.

Figure 4, however, shows that it is not only on a family level that owners have more room to roam.

In terms of living area per household member, owners benefit from more space. Every member of ownership households has 64 sq m space on average, whereas the equivalent figure is 45 sq m for tenant households.

For owners and tenants alike, every household member disposes over the smallest living area in major towns and cities that have the highest prices for owner-occupied apartments and the highest rent levels on rental apartments. 

Figur 4_Graf_Q3_boligareal_UK_OUT

Our prediction: Single households on the rise
We have ascertained that tenants of newly built, private residential rental properties in major towns and cities generally are well-educated but have relatively low incomes and low savings. Nevertheless, exactly major towns and cities see the highest rent levels.

As a large share of tenants in major towns and cities have low incomes while paying high rents, many tenant households have little money to spare. This may help to explain the low amount of savings that we found among tenants in major towns and cities.

The question now remains how future demand will favour rental apartments versus owner-occupied apartments. Will the rental market collapse if there is a continued predominance of rental units over ownership units in new multi-storey apartment blocks?

The proportion of singles in households living in private rental apartments built after 2010 is almost double the proportion of singles in households that own apartments built after 2010 (67% against 35%). Over the past 35 years, the proportion of singles has seen a steady increase.

In 1987, 48% of Danish households were single house-holds; this year, it is 55%. There are no indications that this development is about to discontinue. As a result, it is fair to expect sustained healthy demand for newly built rental apartments from singles.

Infographic families_v4_UK_OUT

The prices of owner-occupied apartments have bearing also on the demand for rental apartments: When ownership prices go up, as seen in major towns and cities in recent years, it means that fewer tenant households qualify for a mortgage to buy an owner-occupied apartment.

Higher owner-occupied apartment prices therefore make rental apartments a more attractive alternative.

Several major towns and cities have experienced a shortage of (affordable) rental apartments. It is feasible that some tenants have moved into apartments that may not have topped their priority list but were the only ones available.

As the newbuilding of rental apartments gradually accelerates in towns and cities, improving the supply and demand balance, tenants will be given a wider range of options. 

Investors and developers active in the residential rental property segment are there-fore well advised to factor in the financial situation of the tenant households living in the geographical areas in which they operate. In this way, investors and developers are better equipped to adjust rent levels and housing standards to match the financial reach of the tenants when developing rental apartments.

This benefits tenants and landlords alike. Firstly, tenants get apartments they can actually afford. Secondly, landlords reduce their risk of vacancies if the leases have a realistic price tag, target-ing the intended prospective tenants. 

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Gregers Nytoft Rasmussen

Head of Research


Gregers is responsible for Colliers’ Danish research function. He has a strong track record with project management of data-driven research, and his primary tasks are related to preparing statistical and econometric analyses.  

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