In today’s housing market there are some unmistakable trends that I’ve commented on in recent articles. The number of owner-occupied dwellings is dropping while rental vacancies are vanishing. Put another way, recent data from varying sources—including the Census Bureau—verifies that vacancy rates have fallen to a 30-year low. Residents are finding fewer choices available to rent than at any time since 1985.
At the end of the 2nd quarter of 2015, the vacancy rate plunged to 6.8% while the year-over-year growth in the number of new households jumped from 115 million to over 117 million. No wonder rental housing availabilities are dropping! Some developers call it “The Perfect Storm.” In the aftermath of The Great Recession that began back in 2008, fewer and fewer adults can afford to own a home. Lending qualifications have tightened as well.
At the same time, employment numbers took a huge hit. The number of unemployed soared while companies cut back on spending and operating costs. Employment numbers have improved during the last two years, yet the actual wages paid have hardly increased.
Wages and benefits paid by U.S. employers this past spring rose at the slowest pace since the second quarter of 1982, the Labor Department revealed. The employment cost index, which tracks salaries, wages, and benefits gained 0.2% in Q2, compared with a 0.7% gain in Q1.
These factors contributed to a slowdown in new construction of multifamily complexes and apartments. While new buildings have begun to be built there’s a lag time before they’re ready to rent. The construction lag helps fuel demand and, subsequently, rental rates will continue to rise for at least the next five years as the Millennial Generation continues to delay entering the homeownership market.
“Millennials” as they are often dubbed, mainly refers to the generation of people born between the early 1980s and the early 2000s. Perhaps the most commonly used birth range for this group is 1982-2004. The Millennials are also known as Generation Y, because it comes after Generation X—those born between the early 1960s and the 1980s. The population of Generation Y is believed to be over 80 million in the U.S. alone.
This huge demographic group has been slower to leave home than their parents’ or grandparents’ generations. The economic fiascos of the past 15 years have made it more daunting for Millennials to strike out on their own. According to a Pew Research Center analysis, a young adult in the 18-to-34-year-old age range is more likely to live with his or her parents now than in 2008. Reasons include student debt and increasing housing costs.
This reality has powerful ramifications for the overall economy and for the housing industry specifically. As a result, property managers all across America are becoming active in the possible solutions.
Working in close cooperation with local and regional housing authorities, property managers are networking to come up with viable ideas. Some are forming ad hoc task forces to make things happen. As a critically important election year approaches, property managers are also letting political candidates know that landlords, property owners, and residents are deeply concerned. Historically low vacancy rates coupled with a rising number of motivated applicants leads to shortages and rental rate inflation. Consider taking an active role in offering ideas that will benefit all involved.
This article originally appeared on PropertyManager.com.