Fall 2017 issue of Horizons

According to the Joint Center for Housing Studies of Harvard University, even though the construction of new multi-family units is at the highest level in 20 years, the additions to the rental supply have not been able to keep up with the huge demand. increase. According to data from the Survey of Market Absorption, the recent additions to the rental supply have been focused on the upper end of the market. With the addition of new units at the upper end, there is potential for some existing units to filter down to lower rent levels. According to the Housing Vacancy Survey , the number of households that are renting has increased by 600,000 from 2015 to 2016. This was the twelfth consecutive year of growth to nearly 10 million households. Although this is an impressive figure, the growth rate in the rental sector in 2016 reflects a deceleration from 2014 and 2015. Even with the increase in multi-family construction, according to MPF Research, the national rental vacancy rate was at a 30-year low in 2016 at 6.9%. The rental markets throughout the country remain tight. As expected when demand exceeds supply, rents were up in 2016 and continued to increase in the first half of 2017. However, there was a slowdown in the percentage increase in rent in 58 of the 100 markets that MPF Research tracks. Low vacancy rates along with increasing rents, mean that multi-family rental properties continue to perform well. According to data from the National Council of Real Estate Investment Fiduciaries, the net operating income for investment grade properties rose in 2016 for the seventh consecutive year. As a direct result of the supply versus demand, rent rates continued to Capital spending per unit has increased 13% annually from 2010 to 2015 in real terms, according to the National Apartment Association. Improvements have focused in the following areas: fitness and business centers, clubhouses and common areas,

Low vacancy rates along with increasing rents, mean that multi-family rental properties continue to perform well.

installation of in-unit washers and dryers and improved kitchen appliances.

Market Trends Demand for housing is primarily driven by an increase in household growth, which is expected to remain strong based on aging millennials and the overall population, as well as immigration. The Housing Vacancy Survey shows on a three-year rolling average basis that household growth has gone from under 600,000 per year in 2009 to 2011 to more than 1 million in 2015 to 2016. Although millennials currently have a limited impact on housing demand, this is expected to change. According to the State of the Nation’s Housing 2016 , published by the Joint Center for Housing Studies of Harvard University, millennials headed only 16 million of the nation’s 124.5 million households in 2015. By 2035, millennials are estimated to head 49.8 million households which will have a huge impact on housing demand. While the number of young adults impacting the housing demand will be growing very rapidly, the older population is growing even faster. According to projections by the Census Bureau, the total U.S. population age 65 and over will be 79 million in 2035. This is an increase of 31 million over the same statistic in 2015. The largest increase in the housing demand of older adults is expected to come from single-person households. The share of adults age 75 and over that are living in nursing homes was 4.9% in 2015 compared to 10.2% in 1990.

Fall 2017

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