More Millennials are opting to reside in multi-family housing than ever before. According to Bloomberg, the number of persons per household has declined steadily since the 1960s, reaching a plateau of about 2.5 people. Because the average household size remains small, fewer people see a need to purchase a single family home, which explains why more rental apartments were built in 2017 than in any year since 1999. As Millennials continue to build their careers and families, though, how long can we expect this trend to continue?
Factors Impacting Family Size
Family size is definitely a factor in what type of housing people opt for, with single family homes offering the space for a larger family that a condo or apartment may lack. This means that whether or not families are growing has big implications for the commercial real estate market. And it doesn’t seem that the trend toward smaller households will end any time soon. The US Census Bureau projects that by the year 2030, international migration will outpace natural population growth. This means that, for at least the next 12 years, we will continue to see smaller family sizes as Baby Boomers age and millennials do not have children at a rate to replace them. Forbes predicts that the number of births per woman is also not expected to increase, for a number of reasons, as outlined below:
Rise in Level of Education
A competitive economy has forced more men and women to pursue higher education, which delays marriage and childbearing. With more people choosing to start their families later, household size stays relatively low due to the shrinking number of fertile years during which couples consider having children.
Closing of the Wage Gap
As more women than ever before continue to join the workforce, many choose to focus on their careers rather than choosing to start a family. Childcare can be cost-prohibitive for many families, with the cost of childcare rivaling housing costs and exceeding them in the Northeast and Midwest according to the National Conference of State Legislatures. The cost of childcare is a major deterrent for career-minded women, who often feel they don’t have the time or resources to raise children.
Fewer Women of Childbearing Age
By the year 2030, most Baby Boomers will be over the age of 65 and are expected to retire. We are already seeing a decline in the number of women who are young enough to have children compared to the overall population as a result of this generational cohort’s aging.
A Less Religious Population
According to Pew Research Center, younger adults are globally less religious than their older counterparts. Many religions promote larger family sizes in their doctrine, so this decline in religious activity means that fewer couples feel obligated by their faith traditions to have larger families and feel more freedom to pursue self-exploration and spirituality instead.
These trends are worth noting because they are based on factors that are expected to remain stable for at least the next 12 years and possibly longer. While the factors pushing people to maintain smaller household sizes are expected to hold, the lifestyle choices Millennials have adapted because of them also help to hold household size in place and to keep people seeking multifamily housing that suites their preferences. Despite the market phase we are entering the labor force remains strong with an unemployment rate of 4% (Bureau of Labor Statistics), and National Real Estate Investor reports that occupancy rates are stable at around 95% in 2018.
Evolving Buying and Renting Habits
Another factor to consider is the buying and renting habits of childless couples. Couples with no children and no plans for children occupy multi-family housing at high rates. This is at least in part due to the fact that less square footage isn’t problematic for two adult residents, and multi-family housing offers convenience and proximity to metropolitan areas. Pew Research Center estimates that 1 in 5 women in the US will never have a child at all, so childless women or couples make up at least 20% of the market, with childless men only raising this percentage. These childless households are looking for proximity to shopping and entertainment, both of which are more plentiful in urban areas, and the desire to entertain friends is also cited by a number of Millennials. This demographic makes a measurable market impact. According to The Washington Post, single-family housing stats are rising much more slowly than expected because of household size, and particularly childless couples.
The outlook is good for multifamily real estate investors. Condos, townhomes and apartments are expected to stay in demand because they cater to childless couples and smaller households, and these demographics are expected to remain stable because of economic and social patterns for at least a decade to come.