6/10/2016

Harvard Study: Multifamily is Hot

CAMBRIDGE, MA--Multifamily is hot. That’s the upshot of a recent study produced by Harvard University’s Joint Center for Housing Studies.

According to the study, over the past 10 years, from 2005 to 2015, the share of US households that rent rose from 31 to 37%, the highest level since the 1960s. A total of 43 million families currently live in rental housing.

Why? A number of factors contribute: “The sharp downturn in both the economy and housing market [the result of the bursting housing bubble] has renewed appreciation of the benefits that renting offers,” the report says.“In particular, renters incur much lower moving costs than owners, enabling them to respond more easily to recent changes in employment and housing-market conditions. Renters also face far less financial risk by not having a significant share of their wealth tied up in a single investment whose value can swing dramatically. And finally, renters are relieved of responsibility for and the expense of property maintenance.”

Demographic trends also contribute, and this does not mean Millennials only, although they are certainly well-represented in the cohort of renters. Gen Xers too figure in multifamily’s solid growth numbers.

Despite the press that the younger generations garner, real growth came in the form of Baby Boomers, says the study. “The largest increase . . . was a 4.3 million jump in the number of renters in their 50s and 60s,” says the report. “This growth reflects the aging of baby-boomer renters (born 1946–1964) as well as declines in homeownership rates among this generation. While households in their 20s make up the single largest share, households aged 40 and over now account for a majority of all renters.”

It seems that the real estate development industry is pushing to keep up with demand. “In response to record growth in demand, the rental housing stock expanded by approximately 8.2 million units” in the decade from 2005 to 2015, says the study. “While new multifamily construction was responsible for roughly a fifth of this increase, conversions of single-family homes from owner-occupancy and other uses accounted for the lion’s share of growth.”

For more on the report, click here.

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