‘Accidental Economist’ with Jack Kern: Keeping an Eye on the Suburbs

“All my life, I never really felt comfortable anywhere in New York, except maybe in an apartment somewhere.”
—Martin Scorsese

I’ve been traveling a lot since the first of the year. I spent a lot of time in Denver, Los Angeles and Boca Raton in January. When I have time, I go around and look at units under construction or newly opened. There is quite a contrast between the apartments in these cities.

I tend to gravitate towards newer buildings and find that there is a growing similarity between condos and market rate apartments. It used to be that there was a huge gulf between the two, that you could count on the apartment being spacious and pretty vanilla, sort of like a warehouse for people. Condos in days past were loaded with features that renters could only wish for.

It wasn’t like it is today, with rentals being mapped as condos, and condo buildings being rented out because they couldn’t attract enough buyers.

And it used to be that rentals were leased up to a cohort that consisted of younger persons renting or sharing an apartment with their friends. But, as time has progressed, more buildings have older renters. It used to be rare to see this, but now it’s commonplace.

Other trends are also worth watching. The Census Bureau released a report recently that said, “More than three out of five non-citizens under age 35 have been in the U.S. for five years or more, with a majority coming before they were 18 years old, according to a new brief released today from the U.S. Census Bureau. Most of these immigrants—about 80 percent—are young adults from ages 18 to 34.

These immigrants are clearly going to be renters, and renters from many places, including Latin America and Mexico, are much more used to multi-generational group quarters and living in a compound or small neighborhood with friends and extended family. Their sports (soccer), religious observation and social conventions in many respects demand a setting that’s different from what the new breed of “urban” apartment offers.

So with this new type of apartment product popping up all over the place, it isn’t surprising that many of the older properties now have a preponderance of immigrants. With just three out of five non-citizens probably joining the labor force, it probably means REITs and professional owners will have a harder time qualifying many of them. It then helps to explain why rental housing is doing better in many suburban communities.

Jack Kern is the Managing Director of Kern Investment Research, and as an amateur demographer predicts that household size will continue to be misunderstood by developers, who are building smaller units. Jack is also the research editor of Multi-Housing News and Commercial Property Executive.