How the trend toward multigenerational living will change real estate development
The concept of the single-generation, single-family home is in decline. Over the past four decades or so, the total percentage of Americans living with family members has increased from 12% in 1980, to 20% in 2019. Experts have not reached a consensus as to why this is happening, but it seems likely that a confluence of factors is to blame.
The skyrocketing cost of housing, stagnant real wage growth, and urbanization trends all play some role in the shift towards multigenerational housing. Americans are also living longer. As the average life expectancy in the United States has climbed, so has the incidence of multigenerational living situations. Many families are unable or unwilling to send their families to a retirement home or purpose-built retirement community. Combine this with the growing number of renters in the US and what you are left with is unmet market demand.
Rising life expectancy has also changed how Americans buy homes. In-law units, once relegated to a small number of high cost-of-living states, are seeing being adopted across the spectrum of property markets. Lennar Homes, one of the premier home builders in the United States, now offers in-law units in its home models in 13 states, and they are far from the only large builder exploring this option.
New housing development strategies
While in-law units are one way to approach this shift in living needs, it is far from the only strategy developers and builders have in their repertoire. Here are a few methods developers can use to take advantage of this new housing paradigm.
Larger multifamily units
In most markets, the majority of multifamily apartment units skew heavily towards one, two and sometimes three bedroom apartments. Some areas, like the Southwest, tend towards multi-residential buildings where three and four bedroom apartments are the norm. This is primarily due to a tendency to have larger families in that part of the country. Working on projects that embrace the need for larger multifamily units could pay dividends in the long run.
The call for mixed-income development has proven benefits for society, including increasing mobility upward, lifting low-income citizens out of poverty, and several other positive effects. Mixed-income developments can also help keep families together. If you are a senior on a fixed income, or a student just starting out in life, it can be hard to afford rent or a mortgage at the same level as a working adult in their prime years. Mixed-income developments can allow families in different stages in life to maintain and strengthen familial connections, and thus the community as a whole.
Another trend gaining steam is the move towards mixed commercial and residential spaces. These spaces allow residents to live and work in the same area, reducing commuting time and increasing the amount of capital that stays within that community. These developments can be fantastic for families of all ages, particularly for retirees who might find part-time work in a local shop or business.
Reconsider the studio
Studio apartments are wildly popular with millennials, and there is a phenomenal demand for them, particularly in urban areas. Smaller spaces are an excellent way to tackle housing affordability, but they are not ideal for multi-generational living. One caveat, as we mentioned earlier, is that sometimes studios can work well as part of a mixed-income property as a way to keep families together.
Identifying and taking advantage of trends is critical for success in the real estate industry. By investing or developing projects that take this societal shift into account, investors can meet the market where it is going to be and reap the benefits of being there first.
Finger Family Song for Kids, by MrNguyen68, CC BY-4.0