The Future of Multifamily Housing Demand
There’s at least one thing young and old can seem to agree on:
in today’s housing market, renting is the way to go.
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They may not like each other’s music or fashion, but there’s at least one thing the young and the old can seem to agree on: in today’s housing market, renting is the way to go.
You’ve probably heard about the millennial generation’s tendency to rent. It’s not as well-known that Gen Xers and Baby Boomers are also choosing to rent at a higher rate today than they did a decade ago. According to Pew Research, the proportion of 35 to 44-year-olds who rent increased from 31% in 2006 to 41% in 2016. Meanwhile the rental rates among 45 to 64-year-olds increased from 22% to 28% over the same period.
Retirees, too, are renting more than in the past — with Americans in their 60s, 70s and 80s deciding that becoming renters makes more sense for them today than a decade ago. In fact, reports estimate that fully a third of current urban applications are for renters over the age of 60. And that trend is expected to accelerate. According to the not-for-profit Population Reference Bureau, the number of Americans 65 or older is projected to double by 2060, when they are expected to make up nearly a quarter of the population (compared to 15% today).
So whether you attribute it to the expensive housing market or to shifting values toward a culture that’s less interested in personal property, the bottom line is more Americans are renting today than ever before. Of total households in the country, 43% rented in 2016, compared to 35% a decade earlier. That increase, in conjunction with data from a Rent.com survey suggesting that at least 80% of millennial renters don’t plan to trade in their apartments for homes anytime soon, suggests a healthy rental market for the foreseeable future.
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"The 73 million baby boomers in the United States accounted for 58.6 percent of the net increase in renter households between 2006 and 2016"
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"Larger apartment units will observe the most demand pressures from this demographic trend, with lower-than-average income, rental unit affordability stress suggests that low-amenity larger units will be in very high demand for some time."
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If you want your communities to compete for this important contingent of renters, you should consider converting one and two-bedroom apartments into three and four-bedrooms, with plenty of closets, built-ins, and extra-tall kitchen cabinets to maximize the square footage. Similarly, outfitting the apartment with more kid-friendly and spill- and damage-friendly materials will save time and money for both you and your renters. Well-kept public spaces, pools, game rooms, barbecues, and other outdoor amenities will provide recreational outlets and keep these younger families entertained. And don’t forget to include multilingual signage at your properties — both to make your communities welcoming, and also to communicate your policies.
If your communities don’t typically include pools or big public spaces, or your units share amenities, like laundry rooms, you’ll have an edge in keeping your rents attractively affordable — one of the most widespread concerns of our current renting climate. As NMHC notes, with “lower-than average income” reflected in the demographic shifts we’re witnessing, “low-amenity larger units will be in very high demand for some time.”
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"For an industry whose bread and butter has long been a single person looking for a one-bedroom apartment, this wellspring of future demand will challenge the traditional economics, planning and design. Working around those well-entrenched assumptions will require new approaches and innovation."
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