We believe it will. Seven of us attended the National Multifamily Housing Conference, one of the most informative conferences of the year. Landlord after landlord mentioned the surprising surge in older renters, many of whom sold their home and chose to rent a luxury apartment walkable to retail and entertainment. Chris Porter, our Chief Demographer, notes that early baby boomers still have homeownership in excess of 80%, and our analysis of trends leads us to believe that a small percentage of them will convert from owning to renting in their empty-nest years.
According to the U.S. Census Bureau, 8.0 million US households headed by those aged 55 to 74 rent, and we left the conference believing those numbers will trend higher. Here are some of the key points we took away from the conference and discussions with our clients:
- In many metros, older renters have been driving demand.
- These renters rent by choice. They prefer an urban or suburban mixed-use location that provides convenient access to retail, dining, and cultural amenities.
- Mature renters prefer smaller, more intimate developments (~180 to 220 units) over large apartment complexes.
- Although 55% of newly developed apartments are studio/one-bedrooms units, there is significant demand for larger three-bedroom units, often appealing to boomers. A number of our developer clients wish they had planned a larger mix of 3+ bedroom units in their developments.
- Contrary to history, three-bedroom units are now often renting for more per square foot than two-bedroom units.
To determine potential locations for new developments, we always look at where high net worth boomers* live. The map below shows the greatest concentrations of wealthy boomers in the Washington, DC, region.
While many of these wealthier households are in areas we would expect, new real estate developments in these areas may not fully account for boomers as renters. As architects, developers, and investors plan for new communities, consider designing rental communities in locations that cater to the growing demand of boomers.
To be clear, we are not forecasting the end of homeownership. We just expect a continued increase in the number of boomers who rent.
* Ages 55-74; household net worth $250,000+