There are more renters in the market now more than ever, and many of them opt for the convenience of apartment living. Here we uncover the reasons rentals are and will continue to be popular with people of all ages and ways property managers can get ahead of the curve.
Rental trends
It’s been over ten years since the Great Recession altered our economic landscape. It transformed how our cities and suburbs look, shifting the “what” and “where” we call home.
While homeownership is still deeply rooted in America’s sense of prosperity, there are fewer people buying homes now than at the start of The Great Recession in 2006. In the second quarter of 2018, those 65 and older comprised the most significant percentage of homeowners (78%). The youngest group, ages 35 and younger, have the lowest rate of homeownership (36.5%).
(Image source: https://www.census.gov/library/stories/2018/08/homeownership-by-age.html)
Americans are still interested in the single-family home, but limiting factors, such as land regulations, labor shortage, and building material costs, restrict the construction of new homes.
A nation of renters
In a 2016 Pew Research Center Survey, the majority of renters cite financial reasons for renting. While 2018 is showing signs of a recuperating economy, the financial crisis continues to cast a long shadow restricting resources needed for home purchases.
As Americans delay homeownership, the number of renters has risen to its highest in 50 years.
Demand for rental housing will continue to grow
Experts note that an additional 4.6 million rental units are needed by 2030. And while 2017 showed a small reduction in rental demand, only 6.8% of rentals were vacant during the second quarter of 2018.
Later bloomers
The majority of households (65%) headed by people 35 years and younger (Millennials) rent. Millennials are holding off key factors associated with homeownership, such as marriage and children, which has driven the number of all U.S. households that are married couples with children to only 20%. While it’s too early to predict, Generation Z will likely follow similar paths.
(Image source: http://www.pewresearch.org/fact-tank/2017/07/19/more-u-s-households-are-renting-than-at-any-point-in-50-years/)
As young people put homeownership on the backburner, renters will not be in short supply, especially given Millennials will surpass Boomers as America’s largest living generation by 2019. And by 2020, Gen Z will outnumber Millennials.
Boomers will rent, too
Younger generations may be the primary driver of increased rental demand, but some Baby Boomers will also join the rental community as they age. Reasons for renting, either in sprawling retirement communities or with just a couple roommates in a house, vary from wanting to reduce financial stress to the quest for personal connection and a greater sense of safety.
Immigration will lift rental demand
Currently, immigrant households account for 20% of renter households. As the immigrant population grows (net immigration is expected to average one million annually over the next decade) and native-born population growth slows, that percentage is expected to swell.
What the future of multifamily housing means for property managers
To be a part of the innovation, consider managing in second-tier metros
If you read our post “Boise Over Brooklyn: Under the Radar Markets for Your Next Commercial Property Development,” you’ll know that people are flocking to second-tier metros like St. Louis, Phoenix, and Miami.
Successful multifamily facilities won’t necessarily be within the city limits
The 2018 Emerging Trends in Real Estate report notes that developing areas are not entirely urban or suburban, but a cocktail of both. “Close-in suburbs” offer the high quality of suburban life without sacrificing the vibrant qualities of a central business district.
Influences like immigration policy, centers of job growth, and transportation trends are also expected to impact population concentration.
Be prepared for working class renters who value community over luxury
Fewer Class A apartments are filling with tenants. Rentals built since 2010 measured a 21% vacancy rate in 2017, a significant jump from the 15% reported in 2016. Modern multifamily housing demand lies in the Class B/C levels to accommodate today’s workforce.
Amenity pro tip: The corporate housing market’s revenue climbed 13% in 2017 to $3.62 billion. Industry observers sense that as the number of these renters flourishes, they’ll prefer furnished apartments with utilities included.
The small apartment building (less than nine units) is also dying. As such, developers are moving beyond the standard one- and two-bedroom apartments. Instead, modern building facilities are lifestyle-driven — wellness aware, ecologically smart, and community conscious.
Focus on creating 360-degrees of “om”
Americans are stressed. In response, the general population is moving toward “360-degree wellness.” The future multifamily building resident will expect holistic living spaces that design outdoor, indoor, private, and public areas that promote healthy behaviors.
Centers for Disease Control and Prevention (CDC) played a role in creating the Fitwel Certification of wellness for multifamily housing. In its evaluation, buildings score points for meeting 55 evidence-based healthy living strategies. Reach a three-star rating, and you’ll be a top contender for health and wellness-conscious renters looking for a place to call home.
Adopting technology will position you for success
Implementing smart home technology in your multifamily buildings should be on your shortlist whether your building was constructed in 2016 or 1916. The benefit of implementing smart home tech is three-fold:
- High-demand amenity (hello, zero percent vacancy rate!)
- Reduced operational costs
- Data that will help inform future decisions
Artificial intelligence
Property managers can better invest their time and money by passing on specific functions to tech powered by artificial intelligence (AI). Insights provided by AI can help you improve the tenant experience much faster than the competition.
Here are a few property management woes that can be solved with AI:
- Constantly fielding simple phone calls? Chatbots like Apartment Ocean can answer quick questions from tenants and potential renters outside the working hours of 9-5.
- Having trouble staying on top of maintenance schedules? Systems like BuildingIQ gather data to predict which areas need attention.
- Noticing an uptick in energy bills? Install AI-powered thermostats like Nest that learn people’s behaviors and preferences, changing the temperature in accordance.
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