Behind the Increasing Demand for Multifamily Households
Submitted by S. Laraby
Robust projections for multifamily growth are fueled by many favorable conditions within the marketplace. Limited vacancy of multifamily units, declining homeownership, favorable demographic trends and attractive government sponsored programs all fuel the trend toward this type of housing, for both tenants and owners. High demand coupled with an improving job market has created a rise in apartment rent across the nation. REIS reported that rent increased by 2.3 percent in 2010, and the trend is expected to continue through 2013 as demand remains strong and construction of multifamily developments struggles to keep up.
Between 2008 and 2010, new households within the market halved due to the recession. This was driven primarily by young adults living longer with their parents as well as this same segment “doubleing up” with others once they did move out to start a new household. As job growth began to materialize in 2011, demand for apartments quickly returned, bearing the weight of half the new households between 2008 and 2010 as well as the current demand for multifamily housing. The demand was further driven by the increasing population of this group, commonly referred to as the echo boomers. Between 1998 and 2012, the total population of this group grew over 13% and shows no sign of slowing. Additionally, in the last 5 years, homeownership rate (purchase vs rent), independent of increasing population, has decreased over 3% which translates to approximately 2.7 million new renters within the market. Furthermore, nearly 8 million homes have been foreclosed upon since 2008 which not only immediately drives demand for rentals but also can potentially deter future demand for home ownership, expanding even outside of this group of foreclosed upon households.