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Table 11
U.S. Rental Households 55–64
(Source: Census Bureau, Yardi Systems)
Table 12
U.S. Rental Households 65+
(Source: Census Bureau, Yardi Systems)
Impact of Social Trends, Demographics
The Baby Boomer generation doesn’t generate as much discussion
as Millennials when it comes to multifamily demand. But the data
indicates that not only will they be a significant generator of demand
going forward, but they have been an underrated part of the rising
demand in the current cycle. According to an analysis by the Federal
Reserve Bank of Kansas City, between 2007 and 2013, Boomers
(individuals between ages 50 and 69) increased occupancy in
multifamily units by 1.3 million, compared to a 459,000 increase
in multifamily occupancy among 20- to 34-year-olds (Millennials).
Put another way, 70% of the increase in multifamily occupancy
in the current cycle came from Boomers, compared to 24% from
Millennials. Another 14% increase in multifamily occupancy came
from individuals ages 70 and up, while there was an 8% decrease
in occupancy among individuals ages 35 to 49, which is an age
when many move out of apartments into single-family homes.
What prompted the increase in rentals among Boomers? The biggest
factor is the size of the age cohort. At 78 million, the Boomer
generation is just behind Millennials as the largest generation
in the history of the U.S. Improvements in medical technology
means that individuals over age 50 are living longer than previous
generations. The youngest Boomers are in their early 50s, so by
virtue of sheer numbers, there will be rapid growth in age groups of
50+ in coming decades. Over the next 15 years, the 50-and-older
population is projected by the Census Bureau to grow by 20%, to
134 million in 2030 from 112 million today. Meanwhile, the 20- to
50-year-old cohort is projected to grow by only 9%, to 140 million
in 2030 from 128 million today. In other words, the 50+ population
will grow by 22 million, almost double the 12 million increase in the
24- to 49-year-old population.
Table 13
U.S. Homeownership Rate by Age Cohort, 1994–2015
(Source: Census Bureau, Yardi Systems)
Another factor is the decline in the homeownership rate. While
discussion around this topic has largely focused on Millennials,
every age category has seen a decline in homeownership. Although
the rate among households headed by individuals ages 55 and
up has not declined as rapidly as younger age groups, there has
been a steady decline in recent years. The homeownership rate
of the 55-64 age group fell to 75.4% in 2Q15 after peaking at
82% in 2Q04. For the 65 and up cohort, homeownership stands
at 78.5% after peaking at 81.8% in 3Q04. It’s not clear whether
the homeownership rate has bottomed or will keep declining, but
it is unlikely to trend upwards. Boomers face the same financial
pressures as younger generations – many are underemployed
and/or have had homes foreclosed – and bank credit remains tight
since the credit crisis.
While homeownership will remain the dominant form of housing for
senior citizens, some Boomers will no doubt become less interested
in maintaining large suburban houses with high property taxes,
expensive maintenance costs and the burden of physical tasks
such as lawn care and snow removal. Boomers also may have
different goals for retirement than preceding generations. Today’s
50+ cohort – especially those that are well-off – are staying active
Led by Boomers, Multifamily Demand to Remain Robust
“…even under the most pessimistic scenario, in which
homeownership makes a comeback, demand for
multifamily units will rise by 2.3 million over the
next decade and 4.6 million over the next 15 years
… under (an) optimistic scenario, some 2.9 million
renter households will be created over the next five
years, 6 million over the next decade and 9 million
over the next 15 years.”