PUBLISHER: Markets & Data | PRODUCT CODE: 1352109
PUBLISHER: Markets & Data | PRODUCT CODE: 1352109
United States multifamily market size was valued at USD 265 billion in 2022 and is expected to reach USD 466 billion in 2030, with a CAGR of 7.31% for the forecast period between 2023 and 2030. Changing demographics play a significant role in the United States multifamily market, with an increasing number of millennials and baby boomers opting for rental living due to flexibility and reduced homeownership burdens, thereby driving demand for multifamily properties. Additionally, urbanization continues to thrive as people seek opportunities and convenience in metropolitan areas, bolstering the multifamily market, particularly in city centers.
Remote work arrangements have prompted renters to reconsider their housing preferences, with many seeking larger spaces and better amenities, driving the development of upscale multifamily properties. The rise of remote work, especially during the pandemic, has led experts to suggest that 10-20% of office real estate stock might require repurposing or removal. Furthermore, sustainable and eco-friendly features are increasingly important to tenants, prompting developers to incorporate green building practices and energy-efficient amenities into their multifamily projects.
During the second quarter of 2023, the multifamily housing market in the United States experienced significant growth, with a remarkable net absorption of 70,200 units. The country's job market improvements strongly supported this positive trend. The US Bureau of Labor Statistics (BLS) data indicated consistent monthly additions of at least 200,000 new jobs throughout 2023. Consequently, the combination of economic recovery, the stabilization of mortgage rates, and the strengthening job market collectively contributed to the steady expansion of the multifamily housing market in the second quarter of 2023.
The evolving dynamics of contemporary lifestyles have driven a transformation in housing preferences, propelling the growth of the multifamily housing sector. An increasing number of individuals and families are embracing a lifestyle of flexibility, convenience, and community engagement. Several factors, including the surge in remote work, the ongoing trend of urbanization, and a growing preference for hassle-free living are powering this shift.
Currently, approximately 83% American population resides in urban areas, marking a substantial increase from the 64% reported in 1950. Projections indicate that by 2050, urban living will encompass 89% of the United States population and 68% of the global population. Remarkably, more than 300 urban areas throughout the United States have populations exceeding 100,000 residents, with New York City standing as the largest among them, boasting approximately 8.8 million inhabitants.
Technology integration is a significant growth driver for the multifamily market in the United States. Modern tenants expect advanced amenities, especially smart home features like intelligent lighting, smart thermostats, and video intercom systems. These amenities enhance convenience, energy efficiency, and security, making properties more attractive. According to a National Multifamily Housing Council (NMHC) survey, 89% of apartment renters see high-speed internet as essential. Additionally, 57% of residents are willing to pay at least USD 20 more in rent for smart home features like video intercoms, smart thermostats, motion-sensor lighting, and smart locks. Furthermore, property developers and managers benefit from technology integration by attracting tenants, commanding higher rents, and improving operational efficiency through remote monitoring and control.
The United States government play a significant role in supporting the multifamily market through various policies and programs aimed at addressing housing affordability and promoting access to rental housing. The provision of subsidies and financial assistance to low-income renters and affordable housing developers is instrumental in addressing housing needs and sustaining the health of the multifamily market. Moreover, the government sets regulations and standards that help maintain the quality and safety of multifamily housing, ensuring that tenants have a decent and habitable living environment.
For example, in January 2023, the White House, under the Biden-Harris Administration, unveiled new measures to promote fairness in the rental market and advance fair housing principles. These actions are in line with a recently introduced Blueprint for a Renters Bill of Rights, which lays out guidelines for federal, state, local, and private sector efforts to enhance tenant protections and rental affordability. Furthermore, the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB) expressed their intent to gather information to identify practices that unfairly restrict housing applicants and tenants. This inquiry covers various rental market practices, including tenant background checks, using algorithms in tenant screenings, adverse action notices by landlords and property management firms, and considering income sources in housing decisions.
In the United States multifamily market, the apartment segment gained a 3.60% of growth traction in 2022 from 2021 concerning both supply and investment performance. Apartments have become the go-to housing choice for many renters, from young professionals seeking urban living to families looking for convenient and flexible housing options. Affordability, shared amenities, and a sense of community drive this segment's popularity. Apartments often provide various unit sizes and layouts to cater to different needs, making them a versatile choice in the multifamily market. As urbanization continues and lifestyles evolve, the apartment segment is expected to maintain its dominant position, playing a pivotal role in the growth and dynamism of the United States multifamily housing market.
The United States multifamily market is witnessing a notable trend toward flexible leasing options. This shift reflects tenants' changing preferences and needs in today's housing landscape. Property owners and operators are increasingly offering shorter lease terms, including month-to-month and three-month options, allowing tenants to adapt their living arrangements to evolving circumstances. Co-living spaces, furnished apartments, and the "rent by the bedroom" model are gaining popularity, appealing to those seeking temporary or shared housing solutions.
Additionally, tenants are granted more control over lease renewals, with flexible renewal options and lease break clauses becoming more common. This trend is further facilitated by technology integration, allowing tenants to manage their lease online with ease. As the multifamily market remains responsive to these changing dynamics, flexible leasing options will continue shaping the rental housing landscape in the United States.