Family-Oriented Rental Housing is the Next Big Thing for Developers
According to a new report released by the Terwilliger Center for Housing and RCLCO titled “Family Renter Housing: A Response to the Changing Growth Dynamics of the Next Decade”, Family Oriented rental housing is the next big opportunity for developers over the next decade.
For the past 20 years, developers have focused on young millennials who are often single, urban, and transient, or well-to-do families looking to buy a McMansion in the suburbs, rather than on those with families who require large units but cannot afford to buy.
The U.S. Census Bureau estimates that the number of people between 30 and 50 years of age will grow by 8 percent between 2020 and 2030. At the moment, 47.6 percent of millennial households have children compared with 55.9 percent of generation X in the same age range. The data highlights the growth segment among millennial households, which in turn will require the development community to create new forms of rental housing that target a broader range of family-oriented options.
As everyone has lamented for years “fewer millennials are buying homes” and with the pandemic, layoffs, businesses closing the situation will only get worse.
As the world’s 2 billion millennials reach their most economically important ages, the shortage of “affordable housing” in many desirable markets (NY, DC, ATL, CHI, LA) will reach a critical tipping point. For those who looking to add children, education costs, and other life and budget changing tokens of adulthood, the costs of those prizes will become increasingly prohibitive.
City Mayors, State Governors, and Entrepreneurs alike are all eager to solve the issue because access to appropriately sized housing at a price that fits family budgets is critical to businesses’ ability to recruit and retain employees and to the health of the city and state economies.
Families represent 33% of the overall rental housing market, but the majority of new developments are not directed toward them. Currently, developers cite a number of roadblocks in the push to create more family-oriented rental housing, including:
Regulatory conditions, like zoning and fees that tend to attract luxury housing above all other types of housing
Fiscal policy that discourages new housing due to overcrowded schools
Fear of large traffic impacts in the surrounding new development areas.
The report recommends a number of potential developments as a response to this burgeoning market, including:
Suburban single-family rentals: which are appealing options for families who cannot yet afford to own homes in the community but someday may wish to do so.
Detached and attached apartments: These feature smaller units at higher densities, and appeal to families who want to experience or transition into suburban lifestyles
Mixed-income and affordable housing: This is oriented toward families. Nearly 58 percent of renters in this space have annual incomes below $50,000 and are an important way of providing lower-income families with good, stable housing at lower price points.