Four in 10 renters in large multifamily apartment communities do not envision homeownership as a part of their American Dream, a survey by Entrata recently found. Instead, lifestyle renters opt for newly constructed, high-quality rental housing with many of the typical amenities of homeownership without its traditional downsides.
The structural strengths of the single-family rentals sector far outweigh cyclical headwinds as it remains well-positioned to build on its momentum in 2025 and beyond.
Multifamily households reached a new high for the third consecutive year in 2023, extending a growth spurt that began after the 2008 housing crisis. With strong tailwinds at its back, multifamily’s latest record may not stand for very long.
The U.S. multifamily market held steady in a more normalized cycle during 2024, following the pandemic-related economic contraction and its rapid recovery. Rental demand remained strong, driven by the ongoing nationwide housing shortage and robust wage growth, as younger generations continued to embrace lifestyle renting.
Unless an 11th-hour agreement is reached, an impasse will trigger the first U.S. government shutdown since 2019. Starting December 21, 2024, many non-essential federal government operations will be limited or suspended, but most multifamily financing activities will not be disrupted.
With home prices nearing all-time highs, single-family rental (SFR) housing is uniquely positioned to capture an even larger slice of the for-sale market. As structured capital markets rebound, SFR will benefit from a set of tailwinds that include robust levels of new construction and favorable trends in cap rates and debt yields. Arbor’s Single-Family Rental Investment Trends Report, developed in partnership with Chandan Economics, shows why this sector’s prospects are so strong.
Building on an organizational commitment to the inclusion of individuals from all backgrounds, Arbor — in partnership with the Real Estate Pride Council and Dr. Sam Chandan, Founder of Chandan Economics, Founding Director, NYU Stern School of Business C.H. Chen Institute for Global Real Estate Finance, and Co-Chair of the Real Estate Pride Council — hosted a speed networking event in Manhattan on November 20 for local LGBTQIA+ students and commercial real estate mentors.
Small multifamily continued to moderate through the midpoint of 2024, amid strong demand despite an elevated interest rate environment and rising property-level yields.
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The owner of a California apartment community wanted to add 12 new units to a multifamily complex located in the heart of the South Bay region of Los Angeles. This repeat Arbor borrower utilized a short-term, variable-rate bridge loan in part to finance the new units; later, the owner sought to convert their bridge loan to permanent, long-term, fixed-rate financing. The borrower was also interested in exploring how enrolling in green financing could provide additional cost savings.
Arbor thoroughly examined the borrower’s position and cash flow and determined they would benefit most from securing a long-term fixed-rate loan through Arbor’s versatile FHA 223(f). We then educated the apartment complex owner about the U.S. Department of Housing and Urban Development’s (HUD) green program and how it could benefit them. Next, we worked closely with our partners at HUD to secure our borrower a fixed-rate FHA 223(f) loan with permanent financing that would maximize net operating income (NOI) as the asset accumulates cash flow.
In response to market conditions, Arbor acted quickly. Through our long-standing relationships at HUD, we expeditiously generated a firm commitment for our borrower and closed within 30 days. The entire Bridge-to-HUD process took only 15 months. They received long-term fixed-rate permanent financing to add units to an upscale apartment community, which includes a gym, a swimming pool, and electric solar panels. Our borrower was then able to lock in a highly competitive rate with additional cost savings available through HUD’s green program. The accommodation of the 12 new units within the underwriting process went seamlessly, resulting in expeditious execution that eliminated interest volatility and, ultimately, maximize loan proceeds.