From 2000 to 2020, the population-adjusted stock of multi-family units has remained steady at 114 units per 1,000 people. In contrast, the stock of single-family rental units has increased from 277 to 286 per 1,000 people. Multi-family construction has failed to keep up with household growth. This is largely due to more restrictive zoning regulations, stringent and divergent building codes, and construction labor shortages relative to the single-family rental sector.
Multi-family starts are projected to be around 400,000 in 2022 representing a 2 percent growth over 2021. The demographics of the multi-family sector point to more demand in the short- to mid-term.
Let’s look at some of those demographics:
- The home ownership rate of people under 35 is 37.8 percent compared to 65.4 percent for the U.S. as a whole
- Only 33 percent of Millennials are saving to purchase a home
- Seniors are living longer and downsizing, and many prefer to rent
- Millennials are delaying marriage and children while facing exorbitant student loan debt
These demographics, and socioeconomic factors, mean that demand for multi-family rentals is rising. Baby Boomers and Millennials prefer renting in community rather than in isolation.
Albert L. Lord III is the Founder and Chief Executive Officer of Lexerd Capital Management LLC. Lexerd is a real estate firm that primarily sponsors investments in opportunistic multifamily assets throughout the United States.