Apartments are Going Up with No Plan of Slowing Down
August 23, 2017
Yardi Matrix and Rent Cafe data show that 2017 will be another record year for apartment construction. The number of units being built is at the highest level since the 1980s. In 2016, 285,000 units were built. With 2017 estimated to top 345,000 units, in one year national apartment construction will have a 21 percent increase.
Three main main factors contribute to the increased demand for apartments: delayed home purchases, aging population, and immigration.
- Delayed Home Purchases- Marriage and children are the biggest drivers that influence purchasing a house. In 1960, 44 percent of US households were married couples with children; today it is only 19 percent. With the expectation for this trend to continue, the need for apartments will rise and the amount of houses purchased will likely decrease.
- Aging Population- People are living longer, and they don’t want to maintain a large house in their latter years. The natural place for this population to turn for housing is apartments. In the northeast, 30 percent of apartment renters are 55 and older.
- Immigration- Approximately 51 percent of population growth comes from international immigration. Research conducted by the National Apartment Association (NAA) shows that immigrants typically choose to rent and for long periods of time. With border states expecting higher growth, this population increase will affect the positive demand for apartments.
By 2030, the US will need about 4.6 million new apartments to meet demand and keep prices in check, according to the National Multifamily Housing Council and National Apartment Association. To reach that number, about 373,000 new units will be needed each year.
The nation is getting closer to meeting the growing demands from renters. "From an affordability standpoint, things are starting to look better for renters," says Doug Ressler, Yardi Matrix senior analyst. "Rent growth is slowing down, even in the country’s most expensive markets and it doesn't stop at that. With more units on the table, renters may be able to get some discounts and concessions on new leases, including one month of free rent, waived move-in fees, and free gym memberships."
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