At Rental Beast, we want you to feel knowledgeable about the marketplace and ready to fully understand and take advantage of the newest real estate trends. Here’s something important we’ve been tracking recently: the rise of new multi-family construction.
Spending on single family new construction has seen modest gains since its time lows in 2008. Multifamily housing has seen some huge gains. In 1993, multifamily construction made up 7% of new residential construction spending, but as of 2017, this number doubled to 18%. Scroll down to check out why there’s an uptick in multifamily construction, what new construction can offer tenants, and the upshot of this important real estate trend.
Why is There New Construction?
High demand for rentals
Rental occupancy is at an all time high. Occupancy reached a whopping 96.3% in the third-quarter 2019, up from the prior years 95.9%, and close to the all time high of 96.4% reached in late 2000.
And, after all, why not? One in every three US adult is a Millennial, and they are three times more likely to rent than any prior generation. The idea that homeownership is a necessary part of adulthood is gradually shifting, and commitment-wary millennials prefer renting everything from their homes to their clothing. Also, keep in mind that it’s possible that the Millennial preference for renting will bleed into later generations–It’s likely we’ll see similar patterns in the eldest members of Generation Z, who, like their predecessors, are heavily burdened by student debt.
This uptick in rental occupancy has major advantages for real estate agents. Don’t forget–there’s super important benefits to working with renters. The rental market moves much faster than the sales market. While selling a home might take months, rental transactions take days or weeks to complete. And, cultivating relationships with current renters is a great way to build a reliable pipeline of first time homebuyers.
(You can read all about Why Rentals Matter Right Now here!)
To keep up with the rising segment of renters, builders are quickly building multi-family housing.
Housing crises across the US
New construction of multifamily housing is especially important in parts of the country facing a pressing housing crisis. LA and San Francisco have far more willing residents than they do affordable rentals to house them. The result? Suburban sprawls, unique rental options (we’re talking about those $1200 a month bunk beds!) and sky-high rental prices inside the city limits. Recent state wide rent caps will go into effect in January and halt rent prices from being hiked over 5% each year. However, many multi-family projects aimed at tackling the housing crisis were already in works before this legislation and will continue to fruition.
With the rising tide of hopeful rentals, new construction can provide lux amenities (think: stainless steel countertops, open floorpans) and unique (think: rooftop pools, dog runs, and yoga studios) to compete with other rental complexes offering unique and luxe amenities. The ultimate goal is to woo affluent older renters looking to live out their golden years in a flexible (and beautiful!) rental.
What Can New Construction Offer?
New apartments can build the type of luxury offerings renters want from the studs up, and take advantage of the rising affluence of renters, and rising number of older renters searching for an apartment building with amenities at their fingertips. For builders, new luxury apartments offer them the opportunity to make money off of high rents. For tenants, the option of luxury apartments is just another reason why they might continue to delay homeownership. Sometimes new luxury apartments aren’t the best solution. In Miami, there has been a large influx of new construction. However, because of its sky-high pricing, it’s done little to alleviate the Magic City’s serious affordability crisis.
On the other hand, new construction can offer some much needed affordable housing. Although the average income of renters is rising, and the demand for luxury apartments is growing, most millennials still name affordability as the biggest reason why they choose to live in a rental. Cities with sky-high rent prices, like Boston, San Francisco, or Los Angeles will gladly welcome appropriately priced new housing.
A bit more safety
Using new technology, builders can create multi-family housing that’s safer. This is especially important in markets prone to natural disasters, where new buildings have been built with safety and longevity in mind. For example, Houston’s low-lying topography has made it a hot-spot for annual flooding. However, Buildings built past 2001 have taken lessons from the disastrous effects of Tropical Storm Allison and made amends to old-faults. The result is flood-proof buildings for tenants. New construction can provide renters with a bit more security.
What Does This Suggest?
Rentals are here to stay
While the sales market has natural fluctuations, the rental market has proved to be more stable. Here’s this stat one more time (because we think it’s so important): rental occupancy reached 96.3% in the third-quarter 2019, up from the prior years 95.9%, and close to the all time high of 96.4% reached in late 2000.
More reason to work with rentals!
The in-flux of new multifamily construction is just another reason to work with rentals. More inventory offers real estate agents more choice for their clients and the opportunity to close more deals! And, with strong rates of rental occupancy, agents will be at no loss for perspective tenants looking to rent.
Ready to take advantage of working with rentals? Rental Beast simplifies every part of the leasing process— from lead generation to lease generation. With Rental Beast’s database of over 7 million listings not found on any MLS, and full CRM, Each Rental Beast listing has no co-brokes attached— if the landlord if offering you commission, you get every penny! Looking to expand your capacity and sharpen your skills? Check out Rental Beast University, our interactive, educational platform. e give you the tools you need to grow your business, and succeed in the real estate agent.
To learn more about the Rental Beast platform or to request a no-obligation demo visit Rental Beast for Real Estate Agents.