Multifamily Properties Capture Largest Share of Overall U.S. Workforce Housing Demand

Multifamily properties capture the largest share of the overall U.S. workforce rental demand, while single-family rentals are the largest individual asset class.¹

Workforce Rental Households across Asset Classes

As examined in our recent blog, while the overall share of workforce housing continues to grow, this segment is more concentrated in single-family rentals and small apartment properties.

In this follow-up, we look at the absolute shares of this demand segment across rental property types. As noted previously, the workforce segment is defined as households falling within a range of 60% to 120% of the area median income (AMI) and assumed primarily to rent at prevailing market rates.

As shown below, of the estimated 11.9 million workforce rental households across U.S. metropolitan and micropolitan areas in 2016, 44% lived in multifamily properties — 33% in small apartment properties (5-49 units) and 11% in large buildings (50 units or more)₁.

Source: Chandan Economics; American Community Survey (ACS), 2016

However, single-family rentals comprised the largest individual asset class, attracting a 38% share of workforce renter households. Duplex-quadruplex properties (2 to 4 units) captured the remaining 18% of households.

Workforce Demand Shifting Toward Multifamily Properties

At the same time, a closer look at the historical data also indicates that workforce households have increasingly gravitated toward multifamily properties.

Comparing the distribution of the workforce demand by asset class in 2014 and 2016, large asset multifamily properties increased their overall share by 72 basis points (bps). Over the same period, demand capture went up by 28 bps for small apartment properties.

In contrast, while single-family rentals and duplex-quadruplex buildings had higher relative concentrations of workforce households, overall demand shifted slightly away from these asset types over 2014 to 2016.

Recent distributional shifts in workforce rental demand toward large apartment properties in part reflect an over-supply in this segment of the market. With expected future price correction, smaller properties, namely small apartment buildings and single-family rentals, are well poised to gain from workforce demand growth.

1 All data is sourced from the American Community Survey (ACS), unless otherwise stated. ACS statistics are sample-based estimates of the compositional profile of the total population in the given year of data collection, and include a margin of error.