Washington, D.C.—A decline in home-ownership rates would seem to suggest a boom for the multifamily industry, but according to Fannie Mae, a shift in renter preference from multifamily to single-family homes and a growing desire for home ownership may force industry professionals to re-think how they attract the key age group of renters to their communities.
A report from Fannie Mae this month reported that home ownership rates have dropped to 65.1 percent this year down from 69.4 in 2004. Despite that, the majority of that renting population has gravitated toward the single-family home market a trend that will likely continue.
According to the report, which cited US Census Bureau data, single-family occupied stock jumped to 54.8 percent in 2011, up from 44.8 percent in 2005. Long-term projections, however, indicate that the number of renters in the 20 to 34 age group is projected to grow to 68 million renters by 2020.
The spurred growth of renters is fueled in part by a decline in unemployment numbers since 2010. While the single-family market seems to be dominant right now, location of available jobs, and appeal to groups outside of the prime cohort of renters, such as seniors and empty-nesters, will play a key factor in the rebound of the multi-housing market, the report suggests.
The construction of new multifamily units is at an all-time high since 2006, with estimates that by the end of 2013 as many as 205,000 new units will be completed and then taper off with 157,000 more new units anticipated for 2014. By comparison, 99,000 new units were completed in 2011 and 123,000 in 2012.
The major primary metro areas seeing the most new growth are also the areas experiencing the most job growth. New York; Washington, D.C.; and Boston have seen a large number of new construction projects aimed at the targeted 20 to 34 age group and smaller, but still significant markets such as Austin, Texas; Raleigh, N.C.; Charlotte, S.C.; and San Antonio are showing promising development numbers as well.
The key to swaying renters back to multifamily communities will be determined by proximity to transit and work, as well as the availability of single-living options as opposed to shared-living homes for younger renters. One concept that has been gaining popularity for the demographic is the “micro” unit, which offers a smaller, minimalistic approach to rental housing, but can afford the resident an opportunity to live within an urban environment at a more affordable cost than a traditional multifamily unit.
The smaller unit approach may end up being a flash in the pan, as the Fannie Mae report says that, over time, renters will likely demand “larger apartments with more bedrooms, more on-site amenities, closer proximity to schools, and more storage space.”