Apartment Wire - 06/24/2015 (Plain Text Version)
The Rental Surge Continues
The Rental Surge Continues
A lower homeownership rate is the new normal. That’s the big takeaway from new analysis from the Urban Institute, which projects that strong renter household growth will keep the nation’s homeownership rate on a steady decline for at least the next 15 years.
This shift in household formations points to an upcoming surge in rental demand as the majority (59 percent) of the expected 22 million households to form between 2010 and 2030 will rent. The report’s authors conclude:
“This change will create a surge in rental demand from now until 2030 that we are unprepared to meet. We need to encourage building of more rental housing suitable for all age groups to accommodate this surge.”
Responding to a recent Wall Street Journal article on HUD’s move to improve diversity in 1,250 communities across the nation by mandating new affordable housing targeting minorities, NMHC Chairman and Avanath Capital CEO Daryl Carter argues in a letter to the editor that such mandates are not only misguided but ultimately ineffective in solving affordable housing challenges. [return to top]
NMHC is seeking advertisers to support our media partnership with National Real Estate Investor (NREI) as part of our Student Housing Conference, scheduled for September 28-30 at the Arizona Biltmore. Advertising in the special supplement promotes your firm’s products and services to tens of thousands of potential business prospects while raising the profile of NMHC’s Student Housing Council and conference. [return to top]
The city’s housing crunch can be complicated to understand, what with tax-break programs, regulations for renters and affordable housing required by law. But a new, online game, “Inside the Rent” helps make sense of it by putting users in the role of a developer, trying to balance rents, debt and expenses. It’s harder than it sounds. [return to top]
Austrian designer Stefan Juust comes up with a pret-à-porter take on apartment furnishing. The so-called travel box manages to pack in a fold-up bed, dining table and chairs, clothing and even a bike in a lightweight box that still fits on top of a car. A crafty solution for budget-conscious apartment dwellers on the move. [return to top]
The California Supreme Court recently upheld a law requiring for-sale residential developers set aside units at below-market rates or pay fees in lieu. While the ruling excludes rental housing, it bolsters local governments’ authority to use inclusionary zoning policies to address affordable housing. Critics point to inclusionary zoning’s faulty economics and inability to address large-scale affordable housing shortages while highlighting alternatives to the controversial policy. [return to top]
Looking for more industry information? NMHC’s website includes a directory of private firms that provide info on apartment market conditions and resident demographics both nationally and in local areas. Firms interested in updating their listings or being added to the directory should contact Chris Bruen at email@example.com. [return to top]
Global private equity firm Lone Star Funds inked a deal to acquire Rochester, N.Y.-based Home Properties for roughly $7.6 billion. Home Properties is the 26th largest apartment owner and 27th largest manager, according to the most recent NMHC 50 rankings. The transaction is another indication that consolidation is intensifying in the multifamily market. [return to top]
Multifamily Market Dashboard
Rapid rent growth—especially that like the industry has experienced in each of the last two quarters—has underscored the issue of housing affordability, creating challenges for the apartment industry.
While the share of households whose housing costs exceed 30 percent of income is higher for apartment renters (53.2 percent) than single-family owners (27.9 percent), this does not mean that apartments are inherently less affordable than single-family homes. Affordability is really about housing costs in relation to income.
Adjusting for income produces a much different picture of affordability. For example, Figure 1 looks at moderate-income households, or those households making at least 80 percent, but less than 100 percent, of the area median income (AMI). In this case, the share of apartment households spending more than 30 percent of income on housing costs is significantly lower than the share of single-family homeowners paying the same percentage of income on housing—averaging 1,355 basis points (bps) less.
Thus, housing affordability is more about income and less about whether a household rents versus owns or lives in an apartment rather than a single-family house. Households making less than 80 percent (much less 60 percent or 30 percent) of AMI struggle to afford housing, period. This suggests policymakers should be looking beyond just housing solutions to address affordability challenges.
For a deeper dive on the affordability landscape, check out the most recent issue of Research Notes.