Reasons for Shift in Housing Occupancy - 2010s
Two insights surrounding reasons for shifts in property occupancy during the 2010s are a fundamental change in how people view renting and the change to a renewed desire to live in urban cities. Details of these insights are below.
Shift to Renting
- One of the biggest shifts in property occupancy during the 2010s is the shift from owning to renting.
- The national occupancy rate for apartment rentals was 95.8% as of the second quarter in 2019, which is the highest occupancy rate since 2001.
- May 2019 saw the highest single monthly absorption rate for apartment units at 119,605 since 2010.
- The main reason for the shift to renting is that according to Draper and Kramer President and CEO Todd Bancroft, "Renting has become mainstream during this decade... There's less of a stigma. Feeling at home is now possible in an apartment. Before the recession, that [was] less true. Apartments were where you lived before buying a home. The push for homeownership was more important then."
- Additionally, the recession called into question the long-held idea that owning property as a savings vehicle and "the investment component of single-family houses has been challenged."
- Even though the shift to renting has been attributed to millennials, experts say the perception of renting has been altered for all generations, including baby boomers. Cushman & Wakefield Managing Director Todd Stofflet stated, "The idea of renting because you can't buy is gone, and not just among millennials."
- The shift to renting has spurred apartment development and in May 2019, in order to meet the demand, more than 426,000 units were under construction in the United States.
- Occupancy rates are highest in urban cities, which is a result of the shift toward renting rather than owning property.
- CBRE Global Chief Economist Richard Barkham stated, "Part of the reason for urban growth is that so much good-quality multifamily has been developed in those places, and the cities have fed on that."
- There has been a focus on developing residential areas within urban environments, which has led to more livable places in cities.
- Additionally, there has been an influx of companies moving to city cores, which has created demand for employee housing near their offices.
- Moreover, these employees are often "younger people looking to live in cities to take advantage of the entertainment, restaurants and transportation, among other amenities found there, which in turn grow as the population seeking them grows.
- Unfortunately, this shift has also led to the affordability issue, as there "isn't enough workforce housing being developed." Most of what is being developed is Class-A housing, which is more of a luxury product than the typical worker can afford.
- Marcus & Millichap National Director-National Multi Housing Group John Sebree said that much of this problem can be attributed to a "change in attitude among municipalities that has favored more expensive apartment development."
- The city cores that dominate in terms of the lowest vacancy rates are New Haven-Milford, Connecticut (1.8%); Akron, Ohio (2%); Cape Coral-Fort Myers, Florida (2.4%); San Jose-Sunnyvale-Santa Clara, California; (2.5%); Hartford-West Hartford-East Hartford, Connecticut (3.1%); Denver-Aurora-Lakewood, Colorado (3.2%); Cleveland-Elyria, Ohio (3.3%); Bridgeport-Stamford-Norwalk, Connecticut (3.5%); and Providence-Warwick, Rhode Island (3.5%).