FAMILY RENTAL HOUSING: A GROWING NEED AND EMERGING OPPORTUNITY National Rental Home Council SFR Virtual Leadership Day July 14, 2020 Adam Ducker, Senior Managing Director, RCLCO
FRAMING QUESTIONS ► Who are family rental households in the United States? ► What can we say about this cohort as a market opportunity? ► Where do they live today and what are we building for them? (Hint: not much of late) ► How is the development community responding to the opportunity? ► What role do lower-density housing typologies and higher-density typologies play? ► What are the constraints and policy concerns? National Rental Home Council SFR Virtual Leadership Day | July 14, 2020 | 2
RENTERSHIP RATES RISING IN EVERY AGE COHORT Homeownership by Age; United States 1980-2019 90% 80% 70% 60% 50% 40% 30% 20% 10% 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Below 25 25-34 35-44 45-54 55-64 65-74 75 And Older Total Source: U.S. Census; BLS; RCLCO National Rental Home Council SFR Virtual Leadership Day | July 14, 2020 | 3
AS WE START A NEW DECADE. . . WHY SHOULD WE CARE SO MUCH? Projected Population by Age; United States 2020-2030 6,000,000 80% 70% 5,000,000 60% 4,000,000 50% 3,000,000 40% 30% 2,000,000 20% 1,000,000 10% 0 0% 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 2020 2030 % of Households with Children (2017 ACS Estimate) Source: United States Census Bureau; 2017 National Population Projections Tables; American Community Survey PUMS National Rental Home Council SFR Virtual Leadership Day | July 14, 2020 | 4
LATER PERHAPS, BUT FAMILY FORMATION RATE LARGELY UNCHANGED Family Composition by Age Cohort and Generation; United States 2019 3,000,000 2010-2020: 30-50 year olds, <1% growth 2,500,000 2020-2030: 30-50 year olds, 8% growth 2,000,000 1,500,000 1,000,000 500,000 0 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 Generation Z - Family Millennials - Family Generation X - Family Baby Boomers - Family Silent Generation - Family Generation Z - Non-Family Millennials - Non-Family Generation X - Non-Family Baby Boomers - Non-Family Silent Generation - Non-Family Source: American Community Survey PUMS National Rental Home Council SFR Virtual Leadership Day | July 14, 2020 | 5
SO WHAT TYPE OF HOUSING DO THESE RENTERS LIVE IN TODAY? Current Type of Residence by Household Type; United States 2017 Family Renters 38% 9% 48% 5% Other Renters 20% 5% 71% 3% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Single-Family Detached Single-Family Attached Multifamily Other Source: American Community Survey PUMS National Rental Home Council SFR Virtual Leadership Day | July 14, 2020 | 6
SO WHAT TYPE OF HOUSING DO THESE RENTERS LIVE IN TODAY? Distribution of Occupied Rental Housing Unit by Product Type; Raleigh Durham MSA 2016-2018 HOUSEHOLD TYPE PRODUCT TYPE SINGLE COUPLE ROOMMATES FAMILY TOTAL SFD 3% 7% 5% 13% 27% SFA 2% 3% 2% 4% 12% 7% 2-4 Unit Buildings 2% 2% 2% 2% 5-49 Unit Buildings 12% 10% 7% 10% 40% 50+ Unit Buildings 5% 4% 1% 1% 12% Other 0% 0% 1% 1% 2% Total 24% 26% 18% 31% 100% Source: American Community Survey PUMS National Rental Home Council SFR Virtual Leadership Day | July 14, 2020 | 7
AND WHO ARE THESE RENTAL HOUSEHOLDS? Marital Status of Family Households; United States Income Distribution of Family Households; United States 2017 2017 25% 2% $150,000 And Above Separated 5% 6% 24% $100,000 to $149,999 3% 8% Widowed 2% 16% $75,000 to $99,999 10% Never Married or Under 15 7% 30% Years Old 16% $50,000 to $74,999 19% 10% Divorced 8% 15% $35,000 to $49,999 17% 79% 10% Married Under $35,000 47% 41% 0% 20% 40% 60% 80% 100% 0% 10% 20% 30% 40% 50% Family Owners Family Renters Family Owners Family Renters Source: United States Census Bureau; 2017 National Population Projections Tables; American Community Survey PUMS National Rental Home Council SFR Virtual Leadership Day | July 14, 2020 | 8
HOW QUICKLY WILL THE HOUSING INDUSTRY PIVOT? RCLCO Macro Housing Demand Forecast; United States 2019-2029 HISTORICAL GROWTH IN OCCUPIED INVENTORY STRUCTURAL DEMAND REALIZED DEMAND 2010-2019 2015-2019 2019-2029 2019-2029 Headship 2015-2019 Avg. % Married 2015-2019 Trend % With Children 1990-2019 Trend % in MF 2015-2019 Avg. % Own 2010-2019 Trend NEW HHs 1,149,368 1,017,314 1,408,563 1,408,563 SF 588,558 747,535 960,314 860,314 Own 138,221 670,760 409,565 609,565 Rent 450,337 76,776 550,750 250,750 2-4 Unit/Other 39,086 -115,708 183,472 41,757 Own 39,404 43,838 83,515 41,757 Rent -318 -159,546 99,958 0 MF 521,725 385,487 264,777 506,491 Own 227,348 249,073 173,669 215,426 Rent 294,377 136,414 91,108 291,065 Owners 404,973 963,671 676,071 866,748 Renters 744,395 53,643 661,611 541,815 Ownership Rate 35.2% 94.7% 50.5% 61.5% Source: American Community Survey PUMS National Rental Home Council SFR Virtual Leadership Day | July 14, 2020 | 9
AND WHO ARE WE BUILDING FOR? Annual SFR Supply Additions by Change in % of SFD Purpose-Built as SFR; United States 2010-2030 Based on Historical SF Housing Starts Based on Projected SF Housing Starts 250,000 200,000 150,000 100,000 50,000 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2.50% 5% 7.50% 10% Source: Axiometrics; RCLCO National Rental Home Council SFR Virtual Leadership Day | July 14, 2020 | 10
AND WHO ARE WE BUILDING FOR? Average Size of New Multifamily Units Delivered; United States 1980-2019 137.2 MM Total U.S. Housing Units 122.8 MM Total Occupied Households 46.4 MM Rented Percentage of Total U.S. Single-Family Rental Occupied Households Properties by Portfolio Size 1 to 2 14.9 MM 79% Single-Family Key metrics of the 14.9 million single-family rentals: 3 to 5 9% Rentals Median monthly rent: $1,073 6 to 10 4% 5.4 MM Median housing cost as % of income: 33.2% Located in Median size of home (square feet): 1,210 11 to 100 6% Top 50 MSAs 100+ (Institutional) <2% Source: Axiometrics; RCLCO National Rental Home Council SFR Virtual Leadership Day | July 14, 2020 | 11
1. SUBURBAN SINGLE-FAMILY HOMES FOR-RENT SECTOR EMERGING IN THE FAST-GROWING SUNBELT REGION Homestead at Hartness Cottage Homes; Greenville, South Carolina ► 70% three-bedrooms ► Average unit size of 1,650 SF ► Rents $1.16 ► Low cost amenities focused on outdoor, active lifestyle Source: Community Website National Rental Home Council SFR Virtual Leadership Day | July 14, 2020 | 12
2. SUBSIDIZED AFFORDABLE RENTAL APARTMENTS FOR FAMILIES NOT EXCLUSIVELY BUT INCENTIVE HOUSING SERVES A FAMILY CUSTOMER TOO El Centro de La Raza - Plaza Roberto Maestas Housing Source: Courtesy of the Developer National Rental Home Council SFR Virtual Leadership Day | July 14, 2020 | 13
3. URBAN RENTAL APARTMENTS FOR FAMILIES STILL VERY LITTLE ACTIVITY HERE Kin on Union; Brooklyn, New York Condo project pivoted to family rentals Light design modifications for family target Studios, 1’s, 2’s and 3 - BR’s Space : Family-friendly amenity spaces, gym, roof deck, stroller parking, baby-proofing kits Services : Nanny sharing + other childcare solutions, early childhood development programming, community-building app, tailored family perks + partnerships Achieving $6.00 psf (10% above underwritten rents), lease-up started on March 27th Source: Developer Website National Rental Home Council SFR Virtual Leadership Day | July 14, 2020 | 14
4. SUBURBAN RENTAL APARTMENTS FOR FAMILIES VERY LIMITED GREENSHOOTS, MAYBE UNDER APPRECIATED Skye at Arbor Lakes; Maple Grove (Minneapolis), Minnesota ► 50%+ Two-bedrooms or more ► Average unit size of 1,200 ► Rents $1.50 (compelling) ► Simple, durable finishes ► Family amenities! Source: Developer Website National Rental Home Council SFR Virtual Leadership Day | July 14, 2020 | 15
AND WHO ARE WE BUILDING FOR? Average Size of New Multifamily Units Delivered; United States 1980-2019 1,040 Average Size (SF) of Units Built That Year 1,023 1,020 1,007 1,009 997 1,002 1,002 1,008 1,009 1,008 1,000 996 991 987 981 980 960 955 954 950 949 940 935 931 923 920 900 880 860 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Year Built Source: Axiometrics; RCLCO National Rental Home Council SFR Virtual Leadership Day | July 14, 2020 | 16
5. RENTAL TOWNHOMES PRODUCT SOLUTION GAINING MOMENTUM AS MANY YOUNG FAMILIES ARE PRICED OUT OF OWNING IN DESIRABLE URBAN OR INNER SUBURBAN NEIGHBORHOODS Camden Highland Village Townhomes; Houston, Texas ► 38 three-bedroom or more townhomes in upscale urban Houston setting ► Average unit size of 2,300 SF ► Rents $2.06 ► Luxury finishes ► Attached two-car garages, private entrances ► Shared amenities with neighboring apartment community Source: Community Website National Rental Home Council SFR Virtual Leadership Day | July 14, 2020 | 17
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