Industry Report: Multifamily Maintains Momentum
The rebound in the single-family home market doesn’t mean that the multifamily market is overbuilt, said Mark Obrinsky of the National Multifamily Housing Council (NMHC). Obrinsky and other real estate experts spoke about multifamily housing trends at the recent annual conference of The National Association of Real Estate Editors in Atlanta.
Although multifamily isn’t losing momentum, as the economy improves and bank financing is easier to get, the development deals being struck today are mostly for market-rate and luxury apartment communities. Meanwhile, the large bulk of the tax credit and affordable units that went into development over the past four years are just starting to come onto the market now—so the demand for property managers who know the tax credit rules should remain high through 2015.
The experts also agreed that while filling units generally isn’t a problem, rent growth even in market-rate units will be somewhat constrained to 3 to 4 percent as long as wage growth during this slow economic recovery is constrained.
Demand for rental housing should remain high as the economy improves and young people who have been living with their parents can finally afford to move out. According to Obrinsky, the percentage of people under 34 living with their parents is still higher than ever.
That trend, combined with the long-term trend of young people delaying marriage, means that the units most in demand right now are studios and one-bedrooms. And the trend toward “micro-units” is forecast to continue. Experts think this is partly because America is merging closer to international standards; apartment sizes in Europe and Japan have always been much smaller than in the U.S.
The micro-unit trend is strongest on the West Coast and in the Northeast; however, a Texas developer told conference attendees that even people in the Lone Star State now want smaller residences, too. But he was quick to add that while micro-units in New York City may be 300 square feet, a Texan might consider a “micro-unit” to be about 1,200 square feet.
That said, some communities—Ventura, Calif., was cited as an example—that have traditionally attracted families and have good schools and other family-friendly services are starting to balk at the development of micro-units and impose zoning restrictions against them. They fear that once the single tenants living in these micro-units get married and have kids, they’ll be forced to move out of the city to find appropriate housing.
The experts also debated whether the 2008 collapse of the single-family home market will have positive long-term implications for multifamily property owners. Will former homeowners—and their children—who lost their homes to foreclosure be reluctant to buy? Will more Americans now and in the future opt to rent as a lifestyle choice?
Experts think yes, but to a degree. They point out that the younger generation is more likely to rent than own when it comes to many things besides housing: They stream movies and music, and rent their transportation using Zipcars and bike-sharing programs. And it’s unlikely that anyone who lived through the recent housing crisis will ever consider a single-family home a surefire investment again.