In recent years, the real estate landscape has witnessed a significant shift in the dynamics of the housing market. Traditional notions of homeownership are being challenged as a growing number of individuals actively choose to rent rather than own their homes. These individuals, known as “renters by choice,” are reshaping the multifamily landscape by redefining what the typical renter is looking for in an apartment. This blog post aims to explore the rise of renters by choice, their motivations, and the transformative impact they are having on the multifamily housing market.
Changing Demographics and Market Conditions
Several factors have contributed to the rise of renters by choice, including changing demographics and market conditions. The younger generations, such as millennials and Gen Z, are increasingly delaying or even opting out of homeownership due to various reasons. They value flexibility, mobility, and the ability to pursue career opportunities that may require frequent relocations. Approximately 65% of millennials prefer renting due to the flexibility it offers, while 55% of Gen Z renters believe that homeownership is less attainable than ever before. Rising home prices, tighter lending standards, and substantial student loan debt have made it more challenging for many to enter the housing market. The current lending environment has more than doubled the monthly cost of homeownership as interest rates skyrocketed, which makes even the most expensive luxury apartments seem like the affordable option.
Valuing Flexibility and Community over Building Equity
Unlike their predecessors, renters by choice are less concerned about building equity in a home and more focused on the advantages of renting. Flexibility is a key aspect that attracts them to the rental market. Renting provides the freedom to move easily, explore new cities, and respond to changing life circumstances without the burdens of homeownership. This flexibility aligns with the evolving nature of work and lifestyle preferences, where individuals value adaptability and the ability to experience different communities and neighborhoods.
Furthermore, renters by choice prioritize the sense of community that multifamily housing offers. As transient interlopers in new cities, having a formal community helps ease the social transition into new areas. These renters by choice value the social aspects and amenities that come with living in well-designed apartment complexes. These individuals seek a living environment that fosters connection, interaction, and shared experiences. As a result, multifamily developers are responding by incorporating community spaces, shared workspaces, fitness centers, rooftop lounges, and other amenities that encourage social interaction.
Higher Income Levels and the Demand for Quality
Renters by choice often have higher income levels, allowing them to afford premium rental properties. They are willing to pay a premium for quality apartments that offer superior finishes, modern appliances, and high-end amenities. Developers and property managers have recognized this demand and are increasingly focusing on providing luxury apartment communities to cater to this growing segment.
This shift in renter preferences has also influenced the design and layout of apartment complexes. Open floor plans, smart home technology, sustainable features, and upscale common areas have become key selling points for multifamily properties. Additionally, property management companies have responded by offering concierge services, organized events, and networking opportunities to create a vibrant and inclusive community within their buildings. These renters by choice are distinct from renters by necessity in the fact that they have disposable incomes and are willing to spend them on “up-sale” features of their living experience whereas the luxury of choosing a community for any reason but affordability on proximity were not available to renters by necessity.
Transformative Impact on the Multifamily Housing Market
Renters by choice have had a transformative impact on the multifamily housing market. Their presence has spurred a wave of innovation, as developers strive to differentiate their properties and cater to the evolving demands of this demographic. The traditional model of renting has evolved into a lifestyle choice, offering a compelling alternative to homeownership. This trend becomes even more prominent in dynamic secondary markets like Nashville and Salt Lake City, where significant net migration of young professionals to the region has brought an onslaught of renter by choice tenant demand to markets with inventory that had largely been developed to meet the needs of renters by necessity (think small garden style complexes in the suburbs without any amenities but a low price per square foot).
President & Fund Manager
As the Managing Director and Chief Operating Officer for Colliers in the Intermountain West, Adam oversaw 200+ real estate professionals and over $4bn in annual transactions. During his time at Colliers, Adam also was the national director of special projects, specializing in coordinating the expansive brokerage network to meet special requirement. Previously, Adam was the Executive Chief of Staff for Coldwell Banker Commercial Advisors, guiding the firm through an expansion from 4 to 30 offices across North America before merging with Colliers. Adam was a founding partner of Millcreek Commercial Properties, a leading merchant developer and fractionalized real estate investment platform, facilitating more than 100 real estate transactions annually. Adam is completing his MBA at Stanford and his JD at Harvard Law.
Adam brings a unique access to and understanding of sourcing channels along with deep transactional and operating experience through managing a leading brokerage and property management firm. His background particularly positions Axia to execute on proprietary investment opportunities in the dynamic mountain west region.