NMHC and NAA partnered with Hoyt Advisory Services to identify the demand for apartments through 2030.
Estimating the Total U.S. Demand for Rental Housing
The housing bubble fallout of 2007-2010 resulted in a paradigm shift in the U.S. among many households. Disillusioned by the bursting of the house price bubble that destroyed equity, many former home owners continue to rent today. Younger households, seeking more mobility and often saddled with student loans, postpone home ownership or choose to have the flexibility of renting. Demographic shifts also affect home ownership and the result has been a declining home ownership rate and corresponding increase in the percentage of households that rent. Some of this shift came about in the same housing units, as owned units became part of the rental inventory and today some one-third of all rental units are single-family units.
Tighter underwriting standards by lenders have resulted in a tighter supply of both multifamily and single-family housing with prices and rents exceeding the growth in income for the past decade. Housing affordability, especially on coastal markets, remains low.
Housing supply is adequate in most markets but there are many exceptions especially along the Northeast and Western U.S. coasts at certain price segments. Affordable market-based housing is only achievable with greater density and smaller sized units, yet land-use policies and political approval processes have moved in the opposite direction adding greater regulation and restrictions. The internet and social media have facilitated quick mobilization for groups that feel threatened by new housing developments that will add traffic and parking congestion in their neighborhood.
Demographic shifts, student debts and tighter underwriting continue to suggest substantial rental demand in the future. Among the major drivers of metro and state level household growth are in-migration policies and trends. As a whole, the U.S. depends on immigration to fuel the labor market. Any declines in immigration rates will severely curtail both the growth of the U.S. economy and future housing demand. In recent years, several metropolitan areas would have had zero or negative population growth were it not for international in-migration. Their natural population increases have been more than offset by domestic out migration and yet international migration has significantly supplemented the population. These metros include Chicago, Detroit, Milwaukee, Philadelphia, St. Louis and New York.
Report Prepared by: Hoyt Advisory Services, Dinn Focused Marketing, Inc. and Whitegate Real Estate Advisors, LLC
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