Multifamily Continues to Soar
Has Your Business Adjusted to This Long-Term Trend?
by Erin Johnson
Student loan debt continues to make national headlines, crippling much of the discretionary income of many millennials. Because of this and other outside factors, many millennials are forced to rent and continue to rent without the capacity to save for a down payment on the single-family home. This trend is different than we have seen.
Young adults are compensating by having roommates and living in multifamily housing for longer durations. No longer are they renting for a year and then moving into a single-family home. The trend is toward a much longer rent period.
We’ve recently seen double-digit growth in multifamily starts, and, in the early gross domestic product estimates for the third quarter of 2015, multifamily fixed residential investment was up 13 percent, marking 14 straight quarters of double-digit investment growth.
A National Rental Crisis
“We are experiencing what we have called the national rental crisis,” says Svenja Gudell, senior director of economic research at Zillow. In 23 of the largest 50 cities in the country, most rental homes are unaffordable for millennials, according to an analysis conducted for Bloomberg by real estate listing website Zillow. Rents have risen around 15 percent since 2010, according to Zillow, while the income for the typical American family has barely budged since 1988.
The gap between what young people earn and what they pay in rent is widest in Miami, where millennials are priced out of 92 percent of all rental listings. Cities such as Los Angeles, San Francisco and New York draw young migrants who might expect to face high costs, and they are living up to their reputation as pricey cities with less than 30 percent of rentals affordable for young adults.
As young adults move into their own places, they choose large, metropolitan cities as their home, often with rental prices out of their price range. With rents steadily increasing, we’re likely to see the average American household size increase, as millennials add roommates to help offset their living costs. “People still want to be homeowners; it’s still ingrained in their psyche as a part of the American Dream,” says Gudell. “It’s just taking them a whole lot longer than it used to.”
Solutions for the Industry
To stay profitable and respond to these shifts, many residential door and window manufacturers are expanding their window product offerings to sell into multifamily construction. As the trend toward multifamily continues to rise for the foreseeable future, manufacturers that have not adapted to multifamily need to increase their focus outside of single-family home offerings to stay relevant.
These products can’t be just
minimum-requirement products, either. With these new market opportunities come new, more stringent requirements in products used to meet regulations and create efficient, comfortable environments for multifamily inhabitants. Additionally, the millennials care about energy efficiency and products that are better for the environment—and their utility costs.
Erin Johnson is the director of marketing for Quanex Building Products.
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