Millennials have dominated the attention of the business world for so long that we’ve almost forgotten that there are other markets out there to conquer. (As a member of GenX you don’t want to get me started about how my whole generation was forgotten because we were squeezed between the Baby Boomers and the Millennials). Wouldn’t you know it, the successors to the Millennials, GenZ, are entering the rental housing market in a big way and they are starting to have an impact. Bob Pinnegar, NAA’s CEO, recently wrote about these changes for the Washington Post. Here’s an excerpt:
By 2020, Gen Z will represent 40 percent of all consumers. While most of the business insight into this generation (those born between the mid-1990s and early 2000s) has been focused on its spending habits as teenagers, its oldest members are now graduating college, entering the workforce and seeking apartment homes of their own…
Gen Z has never lived in a world without the Internet or social media. More than any previous generation, it takes for granted the availability of technology. An iPhone isn’t a technological achievement; it’s simply a part of daily life…
Gen Zers’ social media savvy also makes it critical to differentiate marketing and messaging for various channels… Gen Z uses Twitter more often than millennials, and that platform is an ideal way to reach them with real-time, immediate marketing messages such as sales offers and stories about new amenities. Instagram is for inspiration, so compelling images are essential, and Snapchat is perfect for storytelling through images…
Gen Zers were raised by the skeptics of Generation X and grew up during a recession. They are quick to fact-check claims and, as the IBM and NRF report found, “their focus is on quality and authenticity — not on marketing hype.” For property owners and managers, this means actively engaging with residents and taking a transparent approach when providing community information. Negative reviews online are not deleted; they are thoughtfully addressed.
Freddie Mac Multifamily has published research results showing that older adults are showing less interest in buying a home. From an article in NAA’s Units:
Specifically, the spring profile finds a total of 67 percent of renters view renting as more affordable than owning a home, including 73 percent of Baby Boomers (aged 53-71). Similarly, 67 percent of renters who will continue renting say they will do so for financial reasons—up from 59 percent just two years ago.
The survey finds half (50 percent) of Baby Boomers currently renting do not anticipate buying a home in the future, up eight points from the previous profile taken six months ago. Of that half, 35 percent have no interest in owning, and 15 percent say they will never be able to afford it.
Similarly, 31 percent of Gen Xers (aged 38-52) expressed that sentiment, up from 28 percent from the previous Profile. Of those respondents, 19 percent lack interest and 12 percent say they will never be able to afford it.
“Perceptions of affordability and cost continue to play an outsized role in the choices of America’s renters, as they overwhelmingly see renting as more affordable and the right choice for them – right now,” said David Brickman, Executive Vice President and Head of Freddie Mac Multifamily.
“Remarkably, half of Baby Boomers who rent do not anticipate owning a home in the future, with a growing number of Generation Xers following suit. Indeed, we are witnessing an historic shift in preference among older Americans, as they increasingly are choosing the size, convenience and affordability that renting offers over ownership.”
This trend could have an interesting effect on the amenities that apartment communities provide in the future…Crossfit might be replaced by pickleball!
With housing affordability becoming an increasingly pressing issue across the country it was only a matter of time before someone came up with the Macro-Unit concept, which sounds very similar to what apartment developers serving the student housing market near college campuses have been building for years.
While decreasing the size of the units is one solution for maintaining affordable rents, not all renters want to live in a tiny apartment by themselves. “The millennial generation thrives on the social interaction of internet sites like Instagram, Snapchat and Facebook, and by hanging out with groups of friends at coffee shops, breweries and food halls. KTGY’s Macro-Unit is a new community living solution that integrates a connection to a greater social network by combining the modest rent associated with small square footage per resident, with the social interaction of shared common living spaces,” said Senden.
By minimizing the square footage of the private bedrooms and bathrooms, a larger space can be devoted to the common kitchen and living areas, says Senden. “A variety of seating configurations have been incorporated into the living area to serve multiple people or groups of people engaging in smaller conversations. The lounge seating area in the living room connects through a glass roll-up garage-style door to the large outdoor balcony, expanding the area of the living space. The kitchen provides duplicate appliances to better serve all 11 residents. Two refrigerators, two dishwashers, two microwaves and two ovens make simultaneous cooking projects possible. Booth and bar seating with built-in charging stations are designed for eating and socializing, as well as providing a location for residents to work from home,” Senden stated.
It’ll be interesting to see if this catches on, and what kind of local zoning obstacles developers might face if they pursue the concept.
The government-controlled mortgage-finance company said it would guarantee up to $1 billion in debt from Blackstone’s Invitation Homes Inc., which owns the country’s largest pool of rental homes.
The deal was disclosed as Invitation began pitching investors on its shares this week with an initial public offering expected as soon as next week. Invitation’s stock-market debut could be the largest U.S. IPO since October 2015, if the shares price in the middle of their expected range, raising about $1.5 billion for the company.
Fannie Mae’s involvement signals a belief that homeownership will remain out of reach for many Americans. Homeownership has declined since the housing crisis amid stricter lending standards, mounting student debt, and potential buyers whose savings and credit diminished during the recession. Last year, the homeownership rate reached its lowest level in at least 50 years, according to U.S. Census Bureau data.
Fannie’s guarantee also suggests a view that Wall Street’s housing wager is a long-term business, not just an opportunistic trade made after the foreclosure crisis.
So it looks like institutionally owned and managed SFH rentals are here to stay, at least for the foreseeable future.
The growing trend of single family home communities being built purely for renters is being fueled by demand from millennials and baby boomers according to developers. From the Wall Street Journal:
The new rental communities look identical to for-sale projects, with pools, fitness centers and walking trails. But they are operated like apartment complexes, with management handling maintenance, lawn care and leasing.
Developers cite growing demand from younger millennials and aging baby boomers who want the additional space and traditional setting of a new single-family neighborhood—without the long-term commitment.
“It used to be that if you were an adult and didn’t own your own home, you were kind of a bum,” said George Casey, a former home builder who is chief executive of Stockbridge Associates, an industry consulting firm. That stigma has now “been blown into a million pieces,” he said…
Amenities packages and proximity to quality school districts are crucial to the business model. By offering perks similar to higher-end apartment complexes, the goal is to attract young families who want good schools but may struggle to buy in certain districts because of insufficient savings or high levels of student debt.
An interesting tidbit of info from the article is that the number of renter households increased by 9 million from 2005 to 2015, the most of any 10-year period ever recorded.