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Between 2010 and 2020 Multifamily Residents Will Increasingly Focus on Value and Quality of Living

Home ownership has lost its luster among U.S. heads of household. Increasing credit requirements, growing down payment demands, emphasis on protecting cash flow, and focus on strengthening consumer balance sheets as a function of reduced debt is moving rent from a passing phase for U.S. consumer to the assumed permanent condition. Because of this rental¬† expression¬†homes increasingly will become “home”. With this decision, residents will change their view of these properties. As a consequence, the opportunity and service requirements for rental housing will change as well. Renters interest will turn toward total value where as the transient view persisting to now significantly commoditized the product.

Operators and investors in large part are not tuned into this changing condition. Those who do recognize and address the value factor and who make rental housing into a quality home for residents will be winners. For large portfolio holders in particular the opportunity may be very different from today’s environment. Some potential results include:

Owners and managers can offer onsite entertaining and community events that residents pay to enjoy. The events will tie residents closer together, increase retention, and what would have been a cost to the property will be subsidized by the residents. In all cases, everyone will save money and quality of life may significantly increase.
Properties that find ways to squeeze more out of units like expanding the roommate housing concepts that student housing offers to share kitchens and living areas among more residents could see significantly more rent per square foot while decreasing the effective rent per resident significantly.
“Boarding house” style living is likely to make a comeback where zoning allows resulting a re-emergence of this cottage industry saving renters money and producing good profits for owners.
Large portfolios can take advantage of the stability of their residents and the numbers of units to earn new streams of revenue from commercial partners.
New and modified ideas of floor plans and facilities allowing more dense housing for families and couples could create significant margin gains for owners and cost of housing savings for renters.
Alternative uses of available ground caused by the stability of residents may lead to higher revenue production for garden style properties and properties with available land.
Truly, investors and managers opportunity is limited by imagination, the depth of attention to the change, and the thoroughness with which new cultural modes are understood. Because a large part of these changes will focus on more efficiency and better quality of life, I believe this evolution should be financially positive for owners with the flexibility to capture the opportunity.

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