8 Multifamily Housing Trends in 2020 (Pre & Post-COVID)
April 29, 2020
In the last decade, the multifamily market has experienced hyper-growth in the number of overall renters, average cost of rent for residents, and new building projects.
For those with vested interests in the multifamily housing market, looking forward to trends for 2020 and beyond help to determine what to expect from the PropTech market in the coming years.
8 Major Multifamily Residential Housing Trends to Watch For in 2020
- COVID-19’s Impact
- Virtual Tours & Self-Guided Showings
- Multifamily Renters Expect Luxury Amenities
- Growth of Suburban Sun-Belt Multifamily Rental Market
- Continued High-Occupancy Levels
- New Multifamily Building Construction Projects
- Diversity & Inclusion
- Rising Rents, Rent-Cap Laws, and Rent Moratoriums
But 2020 is a rare year that historians will most definitely look back upon. Those in the multifamily housing industry must balance trends based on data from a pre-COVID market with the fallout of a post-COVID world.
Here are eight trends multifamily housing professionals need to be aware of in 2020.
1. COVID-19’s Impact on Multifamily Housing
No industry is safe from the effects of COVID-19, the housing and property management market is no different.
It wouldn’t be fair to leave COVID-19 off this list. We could have made a list of 9 trends on how the coronavirus itself is impacting the multifamily housing industry – but that felt too gloom and doom. Instead, we’ve decided to list out all the ways COVID-19 is, has, and will impact the multifamily housing market and then move on to additional trends in the industry.
COVID-19-Related Trends & Statistics for the Multifamily Housing Market
- Temporary suspension of evictions due to the inability to pay rent.
- The number of renters that paid rent dropped 12% from March to April 2020.
- 56% of renters say they are looking for new units – mainly fueled by the need for a larger unit.
- Only 17% of renters said they will stay at their current rental unit.
- 45% of new multifamily housing projects in development have been halted.
- Increase cleaning schedules and new sanitization procedures.
- New procedures for food delivery and mailrooms.
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2. A Shift to Virtual Tours & Self-Guided Showings
Because of COVID-19, human-to-human interaction is temporarily on hold and the future of how we will interact with one another is changing. Thankfully we have the technology to allow property managers to still effectively do their job from home, virtually.
One major multifamily housing trend even before COVID-19 – the rise of virtual tours for apartment showings and self-guided tours with the help of property management software and apps. 17% of residents surveyed said they would prefer to tour a unit and building without a leasing agent. Leasing agents and property management groups will need to adopt new virtual tour practices to survive the coronavirus event and provide them another inbound strategy to find new tenants.
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3. Multifamily Renters Expect Luxury Amenities
While COVID-19 has forced residential buildings to shut down their common areas and non-essential amenities, residents increasingly expect multifamily communities to offer luxury apartment amenities.
We’ve broken down the trend of luxury amenities into three categories: convenience, health-related, and entertainment.
- Fitness Center or Gym
- Discount or Free Membership to Local Gym
- Contactless Food Delivery
- Building-Wide Social Distancing Measures
- Hand Sanitizer Stations
- Free Masks & Gloves
- Rooftop Deck or Patio
- Outdoor Grill Areas
- Basketball and/or Tennis Court
- Movie Theatre Rooms
- Recreation Rooms
4. The Growth of Suburban Sun-Belt Cities’ Rental Market
While Americans flocked to cities in the 2010’s, rent prices soared. A renter in Manhattan pays on average $3,100+ per month – and rent rose across the US by 39% for multifamily units.
This has caused a shift in where Americans are living. Since 2010, the five metro areas that have seen the largest growth in renters are all cities located in the Sun-Belt: Dallas, Houston, Miami, Atlanta, and Phoenix.
All of these cities have something in common: They’re all modern cities that have large, sprawling metropolitan areas resembling that of a suburb in comparison to the traditional American megacities such as New York City, Chicago, Washington D.C. and Boston. That’s not a coincidence, as Americans are also shifting to the suburbs – lead by a surge in Millennials.
The reasons for a shift to Sun-Belt cities and suburbs include:
- More Affordable Rent
- Increase in Remote Work
- Proximity to Large Downtown City Areas
5. Continued High-Occupancy Levels in Multifamily Buildings Cause Housing Shortages
Since 2000, the number of US renters in American cities has grown by an average of 31%. In 2019, the occupancy rate of rental units in multifamily building was 96.3% – the highest since 2000 – and is still climbing. Since mid-2018, the rent growth for these units has been steady at 3%.
According to the National Apartment Association, the US will need an additional 4.6 million new multifamily house units by 2020 – an average increase of 328,000 new units annually.
Of course, these numbers are pre-COVID and will inevitably be impacted by the virus. To what extent is uncertain, but there is help on the way in terms of new multifamily units currently being constructed.
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6. New Multifamily Building Construction Projects Continue to Surge
While multifamily house units are near capacity, help is on the way.
In the last ten years, the number of multifamily residential housing construction projects has exploded with over 2 million units being constructed. In 2020 there are over 370,000 new units in multifamily residential buildings in development, with over 30% of those units residing in multifamily housing complexes of 20 or more units. That is over double the multifamily unit growth in 2019.
There is a catch though. From these numbers, one would assume that this growth in new house development projects would solve the lack of available multifamily units problem. That’s not the case, as 80% of these new units are located in luxury multifamily buildings. Overall, 1 in 5 multifamily housing units in the US is considered a luxury rental unit.
The Impact of COVID-19 on Multifamily Development Projects:
It’s important to note that since COVID-19, it’s reported that 20% of new construction projects have already been shut down, and 45% have been instructed to stop construction.
7. Diversity & Inclusion in the Multifamily Housing Industry
Diversity and inclusion are the pillars of creating a recruitment and retention plan for residential communities and property management groups.
Diversity & Inclusion for Renters
As America continues to become more diverse, so does the housing market. The number of renters across different segments of the population has experienced a surge in the last ten years.
Communities are also facing pressure to have better equal-opportunity rentals for minorities to reflect to the demographic makeup in their communities – including having proper representation in their buildings for Americans who identify as or with the Asian, Black, Latino, LGBTQ+, Native, and veteran community.
Diversity & Inclusion Among Property Management Employees
The rise is a diverse renter pool is a reflection of the overall diversification of America. That means it’s also critical for property management groups and residential building communities to reflect the makeup of their neighborhoods in their staff representation.
Renters will want to live in multicultural communities that hire and support their local minorities – and at the end of the day want to live in a building that hires those similar to their background. They also expect to live in a building that showcases its diversity and acknowledges cultural events for all members of the community.
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8. Rising Rents, Rent-Cap Law, & Rent Moratoriums
Rents across the US continue to rise for multifamily units – climbing 3% in 2019 to an average of $1,416 per month for a multifamily housing unit. Popular Sun-Belt cities such as Phoenix and Las Vegas have experienced rent increases of up to 8% in the last year.
Rent increases are expected due to inflation but have been heightened by the shortage of available units across the country. This has led to three states (New York, California, and Oregon) to create new rent-cap laws.
Rent-Cap Laws by State:
- California: Inflation + up to 5% annually
- New York: Sweeping changes across the board including rent-caps, security deposits, renovations, and more.
- Oregon: Inflation + up to 7% annually
Many states have also implemented rent moratoriums and anti-eviction laws to help citizens struggling to pay rent due during the COVID-19 national lockdown. Property management groups and landlords now face the challenge of ethically collecting rent during COVID-19, and then rely on government grants, loans, and programs to help them make up for the loss in cash-flow.
Having said all that – COVID-19 has thrown a major wrench in the multifamily housing market – as it has to all aspects of our new way of living.
History is a great tool for predicting the future, and those in the multifamily property management industry should rely on historical data and trends to make education decisions (and sometimes guesses) to make the right business decisions for their properties and buildings.
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