The family-oriented rental housing market stock has failed to keep pace as developers have increasingly focused on the youngest millennials who are often single, urban and transient, rather than those with families and require larger units to support them, according to aÂ new reportÂ released by the Urban Land Instituteâ€™s (ULI)Â Terwilliger Center for HousingÂ andÂ RCLCO. ULI is a global, multidisciplinary real estate organization whose work is driven by more than 45,000 members dedicated to responsible land use and building thriving communities.
The report,Â Family Renter Housing: A Response to the Changing Growth Dynamics of the Next Decade,Â outlines the business case and need for more family-oriented housing now and in the next decade. The U.S. Census Bureau estimates that the number of people between 30 and 50 to grow by 8 percent between 2020 and 2030. At the moment, 47.6 percent of millennial households have children compared to 55.9 percent of Generation X at the same age period. This highlights room for growth among millennial households, which, in turn, will require the development community to create new forms of rental housing that target a broader range of households, particularly family-oriented ones.
â€śAs the worldâ€™s 2-billion-strong millennial generation reaches its most economically important age, household formation is increasing, and as families add children, the shortage and cost of rental homes is growing as well,â€ť said Christopher Ptomey, executive director of ULIâ€™s Terwilliger Center for Housing. â€śAccess to appropriately sized housing at a price that fits family budgets will be critical to businessesâ€™ ability to recruit and retain employees and to the health of city economies. ULIâ€™s Terwilliger Center appreciates having had the opportunity to work with RCLCO to call attention to this substantial opportunity for residential development in markets throughout the U.S.â€ť
Although families represent 33 percent of the overall rental housing market, most new development is not oriented towards these renters. At the same time, housing preferences are shifting in a way that is becoming increasingly supportive of family-oriented rental development.
There are a number of roadblocks that developers cite in the push to create more family-oriented rental housing, including:
– The perceived level of risk due to the lack of market data suggesting otherwise
– Regulatory conditions, including entitlement zoning, single-family zoning, impact fee burden and zoning codes that tend to attract luxury housing above all others
– Fiscal policy that discourages new housing due to overcrowded schools
– Fear of large traffic impacts in the surrounding areas
The report recommends a number of potential development responses to this burgeoning market, including:
Suburban rental apartments: these rentals can serve as transitional living opportunities for families that are searching for more permanent housing nearby.
Surburban single-family rentals: Typically located in suburban or exurban areas, these are appealing options for families who cannot yet afford to own homes in the community but someday may wish to do so.
Rental townhouses: This development type, common in the suburbs, can serve as housing for younger families who are not yet ready to move from their mixed-use neighborhoods but are starting to require additional space.
Detached and attached apartments: These apartments tend to feature smaller units at higher densities, and appeal to families that want to experience or transition into suburban lifestyles, but who may not want to or cannot afford the larger homes in these neighborhoods.
Urban rental apartments for families: Although currently uncommon, these types of rentals have begun to emerge for millennial families who do not want to leave their urban lifestyles, but cannot afford to purchase large enough homes in their neighborhoods.
Mixed-income and affordable housing: This development type is the most common, though it rarely is exclusively oriented towards families. Nearly 58 percent of renters in this space have incomes below $50,000 and are facing dwindling market-rate housing options. New development in this space is an important way of providing lower-income families with good, stable housing at lower price points.