Profound social, cultural, and demographic trends are reshaping the way we live, work, and play. In the process, these trends are paving the way for a rental housing boom unlike anything seen in recent history. For the first time in decades, economic conditions—notably expensive housing prices and rising interest rates—favor rental housing over for-sale housing. At the same time, a wave of young adults and immigrants entering the housing market will drive apartment demand to new highs in the coming years.

Beyond simply building more apartments, however, the momentous forces of change underway in our society will require apartment firms to rethink what they build, where they build, and how they build. Four key factors, in particular, are already changing the rental housing sector: demographic trends, proximity, sustainability, and affordability.

¿SE HABLA ESPAÑOL? For more than a decade, the number of renters in the United States has remained relatively stagnant. But get ready for that to change. Between now and 2015, the number of renter households is expected to increase by at least 1.8 million. Yet the raw numbers do not tell the full story; the important fact for apartment firms is that minorities will generate the entire gain and will eventually account for the majority of renter households. As the country becomes more ethnically diverse, apartment firms will have to adapt their operations to meet the unique needs of these new renters.

As the National Multi Housing Council observed in these pages last December, immigration is enormously important to the apartment sector. Thanks to an enormous wave of immigration in the 1990s—the largest ever—one in five heads of U.S. households is now either foreign-born or the native-born child of an immigrant.

Above all, however, at least when it comes to housing demand, the immigration story is essentially a Hispanic story. Fully half of the immigrants coming into the U.S. are Hispanic, causing total Hispanic households to increase by 58 percent in the 1990s. Hispanics now account for 54 percent of immigrant renters, a number that grows every year.

The implication for apartment firms: Whether you operate in an urban or a suburban area, to a large degree, the future of rental housing is focused on Hispanics. Apartment companies will need to deal with the language and cultural needs that this new diversity brings. Spanish-speaking staff and bilingual marketing materials and leases will become the norm at many properties. Apartment design (such as more bedrooms) and amenities (such as activities for children) will evolve as the resident profile evolves.

THE MIXED-USE EFFECT For generations, married couples with children dominated our housing markets and caused the suburbs to grow explosively. But today, this group accounts for less than 22 percent of U.S. households. Today's fastest-growing households are young professionals, empty nesters, single parents, and couples without children, and together they are driving the hottest trend in real estate—higher-density, mixed-use neighborhoods that offer a live/work/walk/play lifestyle.

Succeeding in the mixed-use arena, however, requires new and more sophisticated skills. The deals are more complicate and riskier. Capital is harder to obtain and more expensive. Moreover, there are no simple formulas. Every mixed-use development is unique and must be based on the specific needs of that community.

Apartment firms are no longer operating in a vacuum, able to build commodity products that can easily be replicated and duplicated in different markets. Instead, they have to think about how to integrate their property into the neighborhood. They need to consider the scale of their developments and how they connect with existing walkways and transportation systems.

Holdouts to mixed-use development may find themselves pushed toward it by public officials who see mixing uses as the key to accommodating inevitable population growth without investing heavily in extensive and expensive new infrastructure. The good news is that the demand for this more traditional style of living is tremendous. This demand typically justifies the risks.