‘Renters by Choice' Fuel Multi-Family Marketplace
Resort-Style Amenities, Convenience and Flexibility among Benefits of Apartment Living
Prism Capital Partners, LLC
August 11, 2014 - Home ownership is a well-entrenched component of the American dream. While the desire to own a home is still the goal of many people, a fundamental shift is occurring that's drawing an increasing number of consumers in every age group and economic bracket to apartment living.
This new category of renter - the "renter by choice" - is growing fast, despite low mortgage interest rates that make home ownership relatively affordable. Within the next decade, 5 to 6 million new renter households will be created, according to data from the National Association of Realtors. While young adults traditionally have fueled the demand for rental housing, demographic trends indicate that the preference for renting crosses over multiple generations, from baby boomers and downsizing empty-nesters to "Generation Z," the youngest group of renters entering the marketplace.
While tighter lending standards and job insecurity have halted many would-be buyers, the demand for rental living goes beyond simple economics. Lifestyle preferences are among the factors driving the surge in apartment living. It's rare to find somebody who is thinking of a career with a company in terms of 40 years. The realities of the job market today make it so that people may need to move frequently or suddenly, and the flexibility of renting makes it easier to relocate without waiting to sell or agonizing about the housing market before a move. This freedom is a huge benefit that for many individuals simply cannot be overlooked.
The dramatic increase over the past decade in educational debt is also fueling the rental market. We are now graduating whole generations of college students and graduate students saddled with very high educational debt. Recent figures released by the Federal Reserve of New York show that aggregate student loans nationwide have continued to rise. At the end of 2003, American students and graduates owed just $253 billion in aggregate debt; by the end of 2013, American students' debt had ballooned to a total of $1.08 trillion, an increase of over 300 percent. Having monthly student loan payments equivalent to a monthly mortgage payment is driving many recent graduates, even those with high-earning jobs, like doctors and lawyers, away from the starter home market.
For home owners nearing retirement age, property taxes have become a growing burden in recent years, and downsizing to a luxury apartment can have a significant impact on a retiree's long-term financial goals. Even when a mortgage has been paid off, housing often accounts for about 30 percent of retirement expenses. We see many empty-nesters who have been in their homes for decades, put their children through school and have little debt, but still pay upwards of $30,000 a year in property taxes on a $1 million home. Apartment living allows these move-down renters to use their liquid assets to build a retirement nest egg, make investments, travel or pay for a child's wedding.
At Parkway Lofts, our multi-family adaptive reuse project in Bloomfield, New Jersey, there is not one "typical" tenant. The community was designed to meet a broad array of consumers' preferences and expectations, and is attracting everyone from young singles and dual-income couples to professionals and empty-nesters. What all our tenants have in common is the desire to enjoy a "no-strings-
There is no longer a stigma attached to renting versus owning. In fact, a large number of Parkway Lofts' tenants have the financial means to own a home: More than 60 percent of our residents have annual household incomes that exceed $80,000 per year. Although these tenants can afford home ownership, they are choosing the luxury apartment lifestyle.
In designing Parkway Lofts, we carefully considered the needs of each potential renter. Those downsizing from a much larger single-family home have certain expectations for the environment to which they are moving. For that reason, we "upped the ante" both in our amenity package and within the individual homes themselves. We also considered that many of our younger renters may be cash strapped, so we designed our studio apartments to be more affordable on a whole dollar basis.
More people than ever before are realizing they can call a place "home" without actually owning it. Renting is a reflection of America's changing priorities and lifestyles. The "American Dream" is changing, and consumers are finding they can achieve fulfillment and happiness in apartment living just as much as they can through home ownership.