Multifamily starts have continued to hold strong, but with homeownership rates falling coupled with an aging rental stock, the single-family rental market has emerged as one way to keep up with obsolescence.
“Single-family structures are going to dominate the American landscape for some time to come,” says Mark Calabria, director of financial regulation studies at the Washington, D.C.–based CATO Institute. “You need to find a way to get rentals to work with that.”
The aging stock has heightened the need for maintaining and investing in more supply. Smaller apartment buildings are more likely to be older; this year’s Harvard Joint Center for Housing Studies’ America's Rental Housing report indicates that 13 percent of rentals built before 1960 have some structural issues that will be difficult to rectify by rehab. Overall, about 3.1 percent of the nation's rental stock is considered "severely inadequate."
“We’re not replacing multifamily rentals here,” says Shekar Narasimhan, managing partner at McKlean, Va.–based Beekman Advisors. “What we’re doing is adding to the rental stock a new kind of renter.”
Close to 60 percent of renters surveyed by the report consider renting as a way to live within their budget, pointing to the high price of owning a home. Now, nearly two thirds of 25- to 29-year-olds are renting. Rentership rates are highest in the Northeast region, accounting for 60 percent of housing options.
At the height of the homeownership boom, the report says, more than four out of 10 multifamily units were built as condos, for-sale. The recent rental market recovery increased the share of units intended for renter occupancy, which rebounded to more than nine out of 10. The report also notes that just 6 percent of new single-family homes were built as rentals last year, but it represents more than 30,000 units.
Owners are seeing slightly more renters move out for homeownership numbers recently. At Greenbelt, Md.–based Bozzuto Group, for instance, the percentage increased to 17 percent from 15 percent last year—but there’s no doubt the market is in a good place.
“It’s been a wonderful time to be an owner of rental properties,” says Tom Bozzuto, CEO and chairman of the Bozzuto Group. “We’re getting a little bit closer to something that looks like a stable market.”
—Linsey Isaacs is an assistant editor with Multifamily Executive magazine. Follow her on twitter @LinseyI to continue this conversation.