Why Rental Property is a Good Investment Now

The U.S. is on the cusp of a fundamental change in our housing dynamics.  Changing demographics and new economic realities are driving more people away from the typical suburban house and causing a surge in rental demand.  Tomorrow’s households want something different. They want more choice.  They are more interested in urban living and less interested in owning.  They want smaller spaces and more amenities.  And increasingly, they want to rent, not own.  Unfortunately, our housing policy has yet to adjust to these new realities.

Booming Rental Demand

  • One-third of Americans rent their housing, and nearly 14 percent—17 million households—call an apartment their home.
  • Changing demographics mean changing housing preferences.
    • Married couples with children are now less than 22% of households and that number is falling.  By 2030, nearly three-quarters of our households will be childless.
    • 78 million Echo Boomers are beginning to enter the housing market, primarily as renters.
    • 78 million Baby Boomers are beginning to downsize, and data shows seniors are more likely to rent after moving.
  • Between 2008 and 2015, nearly two-thirds of new households formed will be renters.  That’s 6 million new renter households.
  • Because of these changes, University of Utah Professor Arthur C. Nelson predicts that half of all new homes built between 2005 and 2030 will have to be rental units.

A Pending Supply Shortage

  • New multifamily construction set an all-time post-1963 low in 2009 at 97,000 new starts.  2010’s construction levels are predicted to be even lower.
  • We need to be building an estimated 300,000 units a year to meet expected demand.   Yet most forecasts suggest we will start fewer than half that in 2011.  That’s not even enough to replace the units lost every year to old age.
  • While there is a glut of single-family housing, on the apartment side we are heading toward a shortage as early as 2012.  The shortage of affordable rental units is particularly acute.  The Harvard Joint Center for Housing Studies estimates a 3 million unit shortage nationwide.

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