As multi-family and single-family rentals accelerate in growth, the Urban Land Institute is asking developers to remember one thing: families.
According to a ULI report released on Monday, the majority of multi-family and single-family rentals in the United States are marketed to young, single professionals who only need one or two bedrooms. However, ULI said developers are forgetting 13.5 million family renters who need at least three bedrooms to meet their needs.
“Families comprise one-third of the entire renter pool in the United States, where they represent more than 13.5 million households,” the report read. “That figure is more than three times larger than the number of single millennial renters in the country, and it is greater than the populations of both New York City and Los Angeles, combined.”
“Given this magnitude, families play an important role in the rental housing market, even if current development patterns might mask their collective influence,” it continued.
As for-sale housing prices rise, ULI said the need for affordable, family-oriented rentals will only grow stronger over the upcoming decade. To meet demand, ULI noted developers must invest in suburban and urban multi-family, single-family, and townhome rental developments in areas with quick access to schools and other family-friendly amenities.
“Together, declining homeowner rates and rising housing costs are spurring a need for—and a business opportunity to build—new and interesting forms of rental housing that target a broader range of households, including many families,” the report read.
Out of all rental housing types, single-family rentals are the most popular amongst families with 47 percent currently living in single-family attached or detached homes. However, ULI said, developers are building the majority of their single-family stock with the intention to sell.
“This difference suggests that suburban settings—as well as the schools, amenities, and lifestyles that they offer—continue to attract many family renter households, much like family owner households,” the report explained. “Even so, very few homebuilders are delivering single-family homes with the intention of renting them.”
“Although limited data exist on purpose-built single-family rental housing, anecdotal evidence suggests that this product represents a very small share of the broader single-family housing,” it added.
The overwhelming focus on for-sale stock could be a mistake, ULI said, as 58 percent of renter households make under $50,000 per year, meaning they’re unlikely to be in the financial position to purchase a home anytime soon or ever. Beyond finances, the makeup of American families is rapidly changing.
“In the United States, more than half (58 percent) of divorced, widowed, separated, and unmarried families live in rental housing, compared with just over a quarter (26 percent) of all married families,” the report explained. “This statistic suggests that many families decide to rent because of major life changes or for other personal reasons.”
“For example, single-parent households often have lower incomes than two-parent households, which tend to be more economically stable and better equipped to purchase their own homes as a result,” it continued. “Perhaps for these reasons, nearly four-fifths (79 percent) of families that own their homes are married, compared with a minority (47 percent) of families that rent them.”
Looking forward, ULI said developers must prepare for demographic housing changes, which includes Baby Boomers deciding to downsize, millennials deciding to hold off on homeownership, and multiple generations deciding to live together for financial reasons.
“Similar to demographic trends, housing preferences are shifting in a way that is supportive of family-oriented rental development,” the report read. “Together, declining homeowner rates and rising housing costs are spurring a need for new and interesting forms of rental housing, targeted toward a broader range of households.”
In order to increase housing options for families, ULI noted a need for more and better market data on family renters, a more accurate narrative about family housing and the investment risks associated with it, and more developers willing to expand their focus.
Furthermore, ULI said outdated zoning regulations must be revised to offer incentives for affordable housing developers and speed the building process.
“Entitlement, zoning, and other regulatory conditions also limit the amount of family-oriented rental housing development, as well as the locations in which it is able to occur,” the report said. “This dynamic suggests that, even if developers decide to pursue this opportunity, they might encounter regulatory obstacles that prevent them from doing so.”
“Multifamily development faces a number of regulatory obstacles, especially in high-end suburban communities where elected officials and local residents are often hesitant to welcome density,” the report added. “Today, single-family zoning is very common, even in communities that would otherwise be attractive for family-oriented rental housing development.”
Read the full report below: