Rental demand from the workforce housing segment is on the rise, with a relatively higher concentration in single-family and small asset properties.

Data on the extent of housing-cost burden shows that relatively fewer households in small apartment properties are impacted severely by rental expenses.

Metros showing higher than average housing cost shares of household income are also home to higher concentrations of severely cost-burdened households.

The share of household income spent on housing costs for small properties ranges significantly across the largest U.S. cities. Overall, this share has declined slightly with the ongoing economic recovery, improving affordability in recent years.

In their unit mix, small apartment buildings are more specialized in bigger units compared to large properties, while also being more affordable. Renters can find value in small apartment properties, as examined in this update.

Small property unit demand from the boomer-senior age group is dominated by renters living alone, calling closer attention to property-level upgrades.

Household income data underscores the importance of small apartment buildings in maintaining workforce housing options, and thereby, the economic dynamism of cities.

Apartment properties show rent increases across all metro segments; while growing steadily in the largest metros, secondary markets are now experiencing higher rent growth in the small asset space.

The ongoing inventory consolidation in the multifamily market is resulting in higher quality assets. This is illustrated in the steady annual increases in rents, especially in small apartment properties. Average Rent Levels Across Asset Type The current consolidation in the multifamily market, characterized by steady large building inventory expansion and a slight contraction in small building units, is helping retain better performing assets with higher rents. The above contraction in small building units comes in the backdrop of rising competition between large apartment buildings and single-family homes for Millennial rental demand. As shown below, based on the latest data from the American Community Survey (ACS), the average monthly gross rent (total housing expense) of small apartment property units reached around $1,040 in 20161. This is an increase from $1,000 in the previous year. In comparison, US average monthly gross rent in large building units increased from $1,200 in 2015 to $1,240 in 2016. At the other end of the market, the rent for single-family homes was slightly above that of large buildings. Duplex-quadruplex units were the least expensive rental option Read the full article…

Complementing the recent review of household composition and living arrangements, a closer look at householder age indicates the steady graying of small asset apartment demand.