By Jesse Herman, contributing editor
A recent drop in demand for home mortgage applications for home financing, despite low interest rates, has many in the housing market worried. This has opened up opportunities for others, or as it is said, when one door closes another one opens. It seems the apartment rental industry realizes this fact and is prepping their “welcome home” mats.
First, they have to figure out how to accommodate a “retro group” of potential renters. This thought was reaffirmed recently by The National Multi-Housing Commission (NMHC) and National Apartment Association (NAA) that declared, “The dark days of apartment market recession are officially over.”
NAA President Douglas Culkin added, “The U.S. is experiencing social, cultural and demographic changes that are reshaping the way we live, work and play. These trends are creating unprecedented demand for rental housing.”
The Retro-Renter
Minorities will soon be the majority in terms of renter households. The primary focus is on Hispanics who now account for 54% of apartment renters, a number that is going to continue to grow in the years to come. This growing climate puts an extra emphasis on bi-lingual marketing, diverse staffs and apartment designs that facilitate larger families.
As if the baby boomer generation will not complicate the health care market enough, now their kids are throwing a wrench into the already complicated apartment challenges. This involves a “hip” generation who are less concerned about mortgage rates and school districts and more attracted to streamlined environments with hi-tech gadgets to make daily chores easily conquered. They will require urbanized environments where current trends shine through.
It is now up to the Apartment developers to address both of these key requirements to sustain comfortable, stylish, accommodating, diversified and technology oriented environments.
Not just Multi-Cultural: Multi-Purpose Environmentally Friendly
Modern living apartments should facilitate in more than one way. They need to be live/work/walk/play environments to make a particular complex unique.
Couples with kids used to dominate the market but now make up only 22% of renters. Young professionals who are single or without kids are concerned about being near major roads and ease of transportation, being able to work out, take a walk and hit the local night spots with ease. Locations need to be carefully thought out in terms of work and play so precious time is more readily available.
Green, environmentally friendly living is also important. Government agencies are emphasizing green policies by instituting price breaks if specific standards are met. Technology is now enabling Green construction costs to be just 1%-2% higher than traditional construction costs.
Price Rules
Accommodations are wonderful but without affordability, they are irrelevant.
According to the National Housing Conference, the number of families that pay over 50% of the income for housing has increased 67% since 1997.
Douglass Culkin had this to say, “As demand for rental housing rises, our nation’s housing policy continues to emphasize home ownership to the detriment of other quality housing alternatives. In 2007, we will continue our effort to educate legislators about how multifamily rental housing can help meet the need for quality, affordable housing.”
An astonishing 42 million families earned less than the $32,925 annual income needed to support a two bedroom apartment last year. More workers are now forced to live further from their homes, congesting urban traffic.
Declining Federal subsidies has led to extra emphasize on state and local governments needing to step up to the plate. This, however, is not always working out and certain standard need to be reconfigured or established.
The NMHC summed it up best, “Ultimately there will be no single solution to this problem. We must harness the power of the private sector and to do that requires creating financing tools, a plan to address community opposition, fewer regulatory barriers and less red tape.”
There is multi-purpose, multi-solution, diverse groups in the rental industry- all of which will need to learn too accommodate growing numbers of people and varying incomes.
