FAMILY RENTAL HOUSING: A GROWING NEED AND EMERGING OPPORTUNITY - - PowerPoint PPT Presentation

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FAMILY RENTAL HOUSING: A GROWING NEED AND EMERGING OPPORTUNITY - - PowerPoint PPT Presentation

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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

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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

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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?

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RENTERSHIP RATES RISING IN EVERY AGE COHORT

Source: U.S. Census; BLS; RCLCO

10% 20% 30% 40% 50% 60% 70% 80% 90% 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 Homeownership by Age; United States 1980-2019

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AS WE START A NEW DECADE. . . WHY SHOULD WE CARE SO MUCH?

Source: United States Census Bureau; 2017 National Population Projections Tables; American Community Survey PUMS

Projected Population by Age; United States 2020-2030 0% 10% 20% 30% 40% 50% 60% 70% 80% 1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 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)

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LATER PERHAPS, BUT FAMILY FORMATION RATE LARGELY UNCHANGED

Source: American Community Survey PUMS

500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 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

2010-2020: 30-50 year olds, <1% growth 2020-2030: 30-50 year olds, 8% growth

Family Composition by Age Cohort and Generation; United States 2019

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SO WHAT TYPE OF HOUSING DO THESE RENTERS LIVE IN TODAY?

20% 38% 5% 9% 71% 48% 3% 5% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Other Renters Family Renters Single-Family Detached Single-Family Attached Multifamily Other

Source: American Community Survey PUMS

Current Type of Residence by Household Type; United States 2017

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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% 2-4 Unit Buildings 2% 2% 2% 2% 7% 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

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AND WHO ARE THESE RENTAL HOUSEHOLDS?

Source: United States Census Bureau; 2017 National Population Projections Tables; American Community Survey PUMS

Income Distribution of Family Households; United States 2017 Marital Status of Family Households; United States 2017 41% 17% 19% 10% 8% 5% 10% 8% 16% 16% 24% 25% 0% 10% 20% 30% 40% 50% Under $35,000 $35,000 to $49,999 $50,000 to $74,999 $75,000 to $99,999 $100,000 to $149,999 $150,000 And Above Family Owners Family Renters 47% 15% 30% 2% 6% 79% 10% 7% 3% 2% 0% 20% 40% 60% 80% 100% Married Divorced Never Married or Under 15 Years Old Widowed Separated Family Owners Family Renters

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HOW QUICKLY WILL THE HOUSING INDUSTRY PIVOT?

Source: American Community Survey PUMS

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 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%

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AND WHO ARE WE BUILDING FOR?

Source: Axiometrics; RCLCO

Annual SFR Supply Additions by Change in % of SFD Purpose-Built as SFR; United States 2010-2030 50,000 100,000 150,000 200,000 250,000 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% Based on Projected SF Housing Starts Based on Historical SF Housing Starts

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AND WHO ARE WE BUILDING FOR?

Source: Axiometrics; RCLCO

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 Occupied Households 14.9 MM Single-Family Rentals 5.4 MM Located in Top 50 MSAs

Key metrics of the 14.9 million single-family rentals:

Median monthly rent: $1,073

Median housing cost as % of income: 33.2%

Median size of home (square feet): 1,210 <2% 6% 4% 9% 79% 100+ (Institutional) 11 to 100 6 to 10 3 to 5 1 to 2 Percentage of Total U.S. Single-Family Rental Properties by Portfolio Size

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  • 1. SUBURBAN SINGLE-FAMILY HOMES FOR-RENT

Source: Community Website

Homestead at Hartness Cottage Homes; Greenville, South Carolina

SECTOR EMERGING IN THE FAST-GROWING SUNBELT REGION

► 70% three-bedrooms ► Average unit size of 1,650 SF ► Rents $1.16 ► Low cost amenities focused on outdoor, active lifestyle

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  • 2. SUBSIDIZED AFFORDABLE RENTAL APARTMENTS FOR FAMILIES

Source: Courtesy of the Developer

El Centro de La Raza - Plaza Roberto Maestas Housing

NOT EXCLUSIVELY BUT INCENTIVE HOUSING SERVES A FAMILY CUSTOMER TOO

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  • 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

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  • 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

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AND WHO ARE WE BUILDING FOR?

Source: Axiometrics; RCLCO

Average Size of New Multifamily Units Delivered; United States 1980-2019 1,007 1,009 997 1,002 1,002 1,008 1,009 1,023 1,008 991 987 996 981 954 955 950 949 931 935 923 860 880 900 920 940 960 980 1,000 1,020 1,040 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Average Size (SF) of Units Built That Year Year Built

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  • 5. RENTAL TOWNHOMES

Source: Community Website

Camden Highland Village Townhomes; Houston, Texas

PRODUCT SOLUTION GAINING MOMENTUM AS MANY YOUNG FAMILIES ARE PRICED OUT OF OWNING IN DESIRABLE URBAN OR INNER SUBURBAN NEIGHBORHOODS

► 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

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  • 5. DETACHED/ATTACHED APARTMENTS

Source: Community Website

Sunrise on the Monon; Carmel (Indianapolis), Indiana

SOME MOVEMENT HERE AS DEVELOPERS FILL GAP FOR NEEDED TRANSITIONAL LIVING

► Stacked apartments, look like townhomes ► Attached one- and two-car garages ► Benefits from high-performing public schools in upscale suburban setting ► 46% two-bedroom or more ► Average unit size of 1,100 SF ► Rents $1.31

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DEVELOPMENT COMMUNITY – WHY SO LITTLE ATTENTION HERE?

►Why bother? Business is good. . . ►Headlines (“Millennials”) so misleading? ►Capital market guidance ►There’s no good market data ►Not clear if the “juice is worth the squeeze”

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REGULATORY ROAD BLOCKS

►Single-family zoning ►Communities (sadly) don’t want school kids ►Traffic impacts is an unwinnable battle ►Impact fee relief? ►Do zoning and building codes in America drive the industry to luxury housing?

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DISCUSSION QUESTIONS

►As an industry can (should?) we discuss this as both a business opportunity and a social equity objective? ►How do we address the institutional capacity constraints in homebuilding? ►Can we avoid the future of for-rent and for-sale homebuilders competing for lots? ►What can we do to continue to evolve the values discussion around renting? ►Who will fill the information vacuum on built to rent production?

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AUSTIN LA ORLANDO DC

221 W 6th St Suite 2030 Austin, TX 78701 11601 Wilshire Blvd Suite 1650 Los Angeles, CA 90025 964 Lake Baldwin Ln Suite 100 Orlando, FL 32814 7200 Wisconsin Ave Suite 1110 Bethesda, MD 20814

Adam Ducker, Senior Managing Director P: (240) 644-0980 E: ADUCKER@RCLCO.COM WWW.RCLCO.COM