Small Multifamily Represents America’s Workforce Housing Stock
- Average household incomes for renters were well below that of owner households, according to the latest American Community Survey.
- An overwhelming majority of small multifamily households earned less than $100,000.
- The small multifamily asset class also had the highest concentration of renters earning below $50,000.
Housing Choice Strongly Linked with Income
Taking into account factors such as affordability, lifestyle preference and lifecycle circumstance, the decision to rent or own is significant. For many households, however, a below-average income removes much of the available housing optionality.
Public policy remains an active factor in the equation. Renter-focused affordable housing programs contrast with experiments to expand homeownership. The latter has since taken a back seat as many have considered them to be a key contributor to the sub-prime mortgage crisis.
As the effects of the Great Recession appear further in the rearview, the sorting of households into different housing options has settled into a new balance. Building on our recent research, we take a closer look here at the distribution of households by income. We also further examine the distinctions between households of different ownership status and property type.
For starters, by year-end 2018, nearly 60% of all renter households made less than $50,000 annually, compared to only 31% of owners. Among owners, 37% made $100,000 or more compared to only 15% of renters.
Small Apartment Properties House More Middle-Income Renters
While skewed by the large number of households captured under the lower income brackets, the distribution of renters shows differences across property types.
About 62% of all small multifamily households made less than $50,000 annually. When including those making under $100,000, the share rises to 89%.
The share of households in the $50,000-$99,999 range living in large multifamily was 5% lower than in small multifamily. A larger amount of high earners live in large apartment properties, with 18% of households eclipsing the $100,000 mark. This was 7% higher than the share in small multifamily.
Interestingly, large properties have a similar share of households making under $50,000, comprising 60% of the distribution. The majority of headlines about large multifamily tends to focus on class A, highly amenitized properties. However, a mix of high-density affordable housing, inclusionary housing policies and rent control have all had an effect in creating a broad spectrum of income earners in larger properties.
Absent any policy intervention, the above trends suggest that small multifamily offers greater accessibility to housing for workforce households (defined by moderate income levels) than large multifamily. These dynamics will be explored in our upcoming blog, focusing in on the workforce segment.
For more multifamily trends and insights, visit the Chatter blog.
Note: 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. Small multifamily, based on the ACS data, is defined as structures with 5 to 49 units.