So, just what is driving this growth? A drastic change in lifestyles, new attitudes of both city governments and renters, changes in legislation, availability of investment capital, the plummeting of the stock market, and, most importantly, demographics. Barring a dramatic change in immigration policy, household growth should average approximately 1 percent in each of the next five years. This will produce over 400,000 new renter households in each of the next five years.
Empty-nesters, young couples, and singles are re-populating downtown cores in many 24-hour cities. The National Multi Housing Council reports that central cities in the 50 largest metropolitan areas increased their share of multifamily building permits between 1991 and 1999. For the last two years, the fastest growing segment of renters was households earning $50,000 or more. These households are part of a growing number who now choose to rent an apartment for lifestyle, not economic, reasons. A 1999 study by Fannie Mae confirms this. According to the study, nearly 40 percent of renters said that buying a home was either not an important priority or not a priority at all.
They are leaving suburban living behind, moving to major cities to be closer to museums, cultural events, restaurants, and shops. Because boomers are used to large homes, real estate developers are constructing spacious units with amenities that meet their needs, such as concierges and underground parking. About 20 percent of baby boomers rent, according to the 2000 Census.
And as the baby boomers move down to their urban apartments, their kids are settling into their first apartments. Made up of 72.7 million people, echo boomers like to live where the action is and favor cutting-edge design. To meet their needs, more activity-oriented apartment communities are being developed that include swimming pools, clubhouses, whirlpools, and outdoor fireplaces.
Many multifamily developers are already altering their business models to accommodate these renters. Upland, Calif.?based Lewis Apartments Communities (#24) plans to roll-out its new product in California and Nevada, which caters to lifestyle renters. All told, the plan calls for 4,500 apartment units and villas in the western United States in the next three years.
Another factor contributing to demand is immigration and the growth of minority populations. Currently, the majority of Hispanics and African-Americans rent. Of the 1.2 million new households expected to be formed annually this decade, 64 percent will be headed by African-Americans, Asians, Hispanics, and other racial/ethnic minorities – a trend that should continue for at least the next 20 years.