Ted Cushman: The Ten-Penny News

Multifamily Hangs Tough ... But What's a "Family"?

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Housing starts hit a five-month high in June, led by a 30% bounce in multifamily starts. The Wall Street Journal's Dawn Wopatka and Alan Zibel cover the story here, ("Behind the Numbers: Apartments Keep Builders Busy"), observing: "While builders have slowed down construction, apartment developers are racing to meet increasing demand."

Hard demographics argue that this country has to supply housing for its citizens, in the long run. And the long run could be starting already. As Eeconomist Steve Blitz told the Journal, "Families are still being formed, mortgages are tough to get and tougher still for first time buyers, and there has been a decided underbuilding of multifamily homes relatives to single-family dwellings since the early 1990s. In sum, the level of construction in both categories remains decidedly depressed but signs for a cyclical rise in apartment construction continue to build."

Household formation is the physical driver behind home construction. But what, exactly, is a household? These days, it's not what it used to be. The Los Angeles Times today reports that in California, the proportion of families consisting of a married couple with kids continues to fall ("California families are changing, U.S. Census data show," by Kate Linthicum, Ari Bloomekatz and Scott Gold). Rising in its place is a different animal — check that: a whole menagerie of different animals. Blended families, single parents, same-sex couples, same-sex triples — you can't tell the players without a scorecard.

"New census figures show that the percentage of Californians who live in 'nuclear family' households — a married man and a woman raising their children — has dropped again over the last decade, to 23.4% of all household," the Times reports. "That represents a 10% decline in 10 years, measured as a percentage of the state's households. Those households, the Times analysis shows, are being supplanted by a striking spectrum of postmodern living arrangements: same-sex households, unmarried opposite-sex partners, married couples who have no children. Some forms of households that were rare just a generation ago are becoming common; the number of single-father households in California, for instance, grew by 36% between 2000 and 2010."

Builder Magazine took a statistical look at the family status of recent home buyers back in September 2010 ("Will the Real Home Buyers Please Stand Up?"). According to sampling by research firm American LIVES, we reported, "A significant portion [of buyers] are singles, childless couples, or unmarried partners. Nevertheless, families with children still outweigh the rest, even though the household may be anchored by a single mom or dad. And though singles are important, couples still count. By the numbers, married couples (with or without kids) make up about 60 percent of the survey response. And families with kids (including marrieds, single parents, and partners living together) also add up to about 60 percent. But the two groups aren’t identical: 17 percent of married couples have no children at home, and 13 percent of the families with children are single-parent households."

But we were looking at a sample of home buyers. Not all households are buyers or homeowners. What about the renters? Here, it seems clear, you're even less likely to see a traditional family structure, and more likely to see something much harder to define. And in part, that's just because renters are often young people who are trying different lifestyles on, before they settle down.

It's a little more complicated than that, though. Inman News blogger Tara-Nicholle Nelson is the author of "The Savvy Woman's Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." She's also the Consumer Ambassador and Educator for real estate listings search site Trulia.com. In a very insightful blog post on the Inman.com website ("Gen Rent': the new kids on the block"), Nelson psychs out the motivations of the young renting crowd like this:

"Gen Yers... are the first generation to have lived their formative years through this recession, and been old enough to have an opinion on homebuying shaped thereby.

"And for months -- even years -- of this down market, I've heard many a Gen Yer express that they have only ever known real estate ownership to be more of a burden than a blessing, that they've known many friends or family members who have been affected by foreclosure or forced to short-sell, and that they just don't 'get it' -- with 'it' being why homeownership is even viewed as desirable by older people.

"This generation never experienced owning a home that doubled or tripled in value in a year's time; never experienced a market in which they could literally name their price for their home -- and get dozens of offers; and never was able to watch their net worth skyrocket, all on the power of their property.

"So, in some ways, Gen Y could be called 'Gen Rent'. To them, renting seems much more sustainable and less risky. It also seems less burdensome from a lifestyle perspective, offering both freedom from home maintenance concerns and geographic freedom -- the ability to move on a moment's (or a month's) notice across the country, if necessary, to follow a career opportunity or a relationship.

"But recently I realized that some of Gen Y's conversion to Gen Rent might be based less on mindset -- the preference of renting over homeowning -- and based more on access -- or their perception that their access to homeownership is dramatically limited.

"I've come into contact with Gen Renters who are voracious savers; meticulous about retirement planning -- in their 20s; hard-core career strategizers; and who say they would also love to own their home but don't see it as realistic or possible.

"They've read up and know that mortgages are hard to come by. They know down payment requirements are tightening up. They might not have the years of steady income in the same field or bulked-up savings accounts it takes to qualify for a home loan, and even those with great educations and jobs don't feel they can comfortably or sustainably afford a home in many of the high-priced areas where jobs are plentiful."

Smart young people, in other words, who are sizing up their world and making a rational choice. To rent.

And if you think that they would like to rent some old busted junk — well, you might be right, but you might not.

Hey — what are people renting these days, anyway? It just happens that NAHB has some numbers on that this week. For example, you might be surprised to learn that of the roughly 30% of American dwellings that are rental units, just over a quarter are single-family homes. Here's the NAHB "Eye On Housing" report ("The Rental Housing Stock"). But these numbers barely graze the surface. We don't know what these units are like, or whether they meet the needs of the renters.

Pie Chart - Characterizing Rental Units

If you're building for renters (and remember, a lot of this month's strong starts report is about multifamily), it probably helps to think about all these new demographics — the nature of renting households, how they make a living, what resources (financial and otherwise) they have. But to the best of my knowledge, we're a long, long way from knowing what the new wave of non-traditional households needs, or wants, in housing. We've spent a lot of time and energy getting a handle on the desires of the over-the-plate customer — the married couple with 2 jobs and 2 kids. We barely have a clue what the new crop of "housemates" out there cares about.

We like to call ourselves "homebuilders." But the truth is that often as not, we build houses, not homes. In the recent boom years, lots and lots of buyers were buying what we liked to call "second homes." But really, they weren't second homes — they were investment properties. Renters — traditional nuclear families, or individuals, or just housemates — made those rental units into homes.

When we get to understand those renters — who they are, what they need, what they care about — then, maybe, we can start building homes for them.




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About the Blogger

Ted Cushman

thumbnail image Ted Cushman attended Harvard College, served for four years as a U.S. Army paratrooper, and worked as a frame and finish carpenter for seven years before joining the staff of Hanley Wood's Journal of Light Construction (JLC), where he anchored the news desk for 4 years and edited feature articles. Ted now covers the home building industry as a freelance writer from his base in the hills of Western Massachusetts, where he lives with his wife, psychiatrist Cynthia Cushman and their three sons, Jack, Adrian, and Isaiah. In his 15-year career as a construction photo-journalist, Ted has earned a national reputation for insightful, accurate, and practical coverage of home building techniques, building science, and housing economics.