US multi-family industry- fact check (part 1)
We fact checked the provided data related to the US multi-family industry and concluded that allthree facts proved to be false. First, there are currently 47 million rental properties in the US and 61% of those 47 million properties are included in the multi-family industry, which means there are 28.67 million households in the US multi-family industry. Secondly, in 2016, the churn rate was 49.9%. Finally, for rentals with 2-4 units, mom-and-pop owners constitute 76% of the owners, while for rentals with 5-49 units, mom-and-pop owners constitute 25% of the owners.
In order to successfully fact check the three provided statements, we first researched what is considered under multi-family industry. The multi-family category "includes all buildings containing at least two housing units which are adjacent vertically or horizontally. The U.S. Census defines separate multi-family categories for buildings housing two families, three-or-four families, or five-or-more families." Therefore, we fact checked all residential rental market data to correlate with this definition of multi-family industry, where at least two separate housing units are present in one building in order to be considered a part of the multi-family industry.
FACT 1: The US residential rental market has 43.8 million households (false)
The American Community Survey for 2016 says that renters occupied 43.8 million residences in 2016. Out of these 43.8 million households, 34.8% consist of one-unit single-family homes. A simple calculation (43.8 million x 0.348) brings us to the number of 15.24 million rental households being one-unit single-family homes which do not fall under the multi-family industry. The remaining 65.2% renters live in buildings that have two and more units. A simple calculation (43.8 million x 0.652) brings us to the number of 28.56 million rental households that fall under the multi-family industry.
More recent data collected by Harvard in the America’s Rental Housing 2017 report shows that the number of rentals properties in the US increased to 47 million in 2017. 61% of those 47 million properties are included in the multi-family industry, which means there are 28.67 million households (47 million x 0.67) in the US multi-family industry.
FACT 2: The annual churn rate is 62% (false)
While the data for the annual churn rate was not available, we were able to triangulate this data by using the number of people who renewed their expiring leases. Churn rate is defined as "the percentage of subscribers to a service who discontinue their subscriptions to that service within a given time period". If we use this definition for rentals, churn rate would be the percentage of people discontinuing their lease at the point when their lease is up, or better said: not renewing their lease and leaving the current rental home.
We were able to find statistics for 2016 regarding the percentage of people who renewed their lease. According to RealPage, Inc and MPF Research, of all expiring leases in February 2016, 55.1% were renewed. That number marked a 10-year high, and was up 10% when compared with the same data from February 2015. It also "marked the 33rd year-over-year increase in the past 34 months", which means it can be considered a trend where people are more and more inclined to renew their lease. According to the above mentioned definition, churn rate is the exact opposite of the lease renewal rate. A simple calculation leads us to a conclusion that in 2016, the churn rate was 49.9% (100% — 55.1%).
FACT 3: 85% of the multi-family industry is mom-and-pop owned (false)
According to February 2018 data by CoreLogic, 80% of 1-unit properties are owned by mom-and-pop owners. However, these properties don't fall under the multi-family industry, as explained before.
Harvard's 2017 report titled America’s Rental Housing shows that "individuals own three-quarters of rental properties (74%) but just under half of the nation’s rental units (48%), while business entities own 15 percent of rental properties but a third of units". If we look specifically at the multi-family industry the statistics for mom-and-pop owned rentals are as follows:
We fact checked the provided data related to the US multi-family industry and concluded that the fact that US residential rental market has 43.8 million households is true. All three facts (the US residential rental market has 43.8 million households, the annual churn rate is 62%, and 85% of the multi-family industry is mom-and-pop owned) are false.