Small multifamily starts the year from a position of strength with normalizing expense ratios and healthy occupancy rates. After demonstrating resiliency amid headwinds, this subsector is ready to capitalize on any positive momentum in the financial markets. Arbor’s Small Multifamily Investment Trends Report Q1 2024, developed in partnership with Chandan Economics, examines and explains the key developments every investor needs to know.
In the previous two years, Sun Belt markets dominated the top rent growth lists, as pandemic-related re-shuffling settled. In 2023, the list of top markets became much more diverse.
The most recent America’s Rental Housing 2024 report published by Harvard’s Joint Center for Housing Studies (JCHS) takes a detailed look at the state of the rental housing industry.
As part of its focus on mission-driven lending, Fannie Mae recently introduced a new loan product designed to expand affordability and increase accessibility in communities across the country. The government-sponsored agency’s new Sponsor-Dedicated Workforce (SDW) Housing product provides financing for the creation and preservation of affordable workforce housing in underserved communities without the necessity of government subsidy.
As borrowing costs rose and rent growth slowed, multifamily developers pulled back the reins in 2023. Nationally, the number of multifamily building permits sank 20.3% last year, according to the latest data from the U.S. Census Bureau. However, there are many metropolitan markets where activity has not slowed. In this deep dive, our research teams show which metros led the nation in multifamily permitting activity in 2023.
Now as old as 26, Generation Z is on the cusp of reshaping the rental market as they leave the nest in increasing numbers. In fact, it is the only generation adding rental households, while the amount of millennial renters has already peaked. Gen Z, the first digital natives, is poised to become the most influential demographic in the multifamily rental market.
The state of housing affordability in the U.S. has continued to erode as a growing wave of supply-driven policies offers hope of a solution on the horizon. A closer look at the nation’s overall housing needs underscores the increasing urgency of the situation.
Driven by investor confidence in multifamily housing’s long-term fundamentals, the volume of debt outstanding in the sector has grown by nearly 150% since the end of the Great Recession. As this piece will detail, where investment dollars have flowed, housing demand has followed. Through an analysis of newly released U.S. Census Bureau American Community Survey data, our research teams pinpoint the growing size and scope of the largest rental housing property type.
Even as home prices posted their first annual decline in over a decade in March, affordability remains an urgent economic and policy challenge. Today, no states currently have an adequate amount of affordable and available homes for their lowest-income renters. With public support for improving housing affordability growing stronger, state and local governments have been prioritizing policy solutions to close the nationwide housing gap.
Single-family rentals’ role in the U.S. housing ecosystem is malleable. In different markets, this product type serves different purposes — acting as a magnet for transient lifestyle households in some metros, while providing families with affordable access to quality public school districts in others. As a result, SFR retention rates vary dramatically across the country, depending not only on the cost of homeownership but on the purpose that single-family rentals serve in that market, creating a unique group of top markets.
Over the last few years, the list of top rent growth markets was dominated by the more affordable Sun Belt markets. However, over the last several months, a more diverse selection of markets has comprised the list.
Even with concerted public and private initiatives, the affordable housing shortage has persisted in cities and communities across the U.S. Arbor’s Affordable Housing Trends Report Spring 2023, developed in partnership with Chandan Economics, analyzes the challenges and assesses the outlook of a sector that has gained more investor attention amid growing economic headwinds.
While the 2008 financial crisis prompted a cyclical shift in U.S. housing — impacting everything from home prices to who can qualify for a mortgage — an equally impactful demographic change was just taking shape. The unprecedented wave of Baby Boomers that began retiring would disrupt the balance of the housing market.
The small multifamily sub-sector ended 2022 on a high note with originations falling just behind 2021’s peak. As economic storm clouds continue circling, small multifamily appears fortified from any reverberations that may result.