On January 16, 2014, the ULI Terwilliger Center for Housing, in partnership with the American Planning Association and the National Multifamily Housing Council, held the first annual ULI/Carolyn and Preston Butcher Forum on Multifamily Housing. Attended by over 50 industry leaders, the event provided a forum to discuss the changing multifamily residential landscape and led to the development of a series of “big ideas” for expanding the availability of rental housing nationwide. The ten principles presented here are a summary of the ideas framed at this event.

This presentation was developed by Michelle McDonough Winters, Senior Visiting Fellow for Housing at the ULI Terwilliger Center. Special thanks to Doug Bibby and Mark Obrinsky at the National Multifamily Housing Council, who provided feedback on the development of the ten principles and assisted with some content of the presentation.

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10 Principles for a New Era of Multifamily Rental Housing

Guest Post by Michelle McDonough Winters

The landscape for housing in America is changing. While homeownership is an important component of our society and a large portion of us strive to own homes one day, the reality is that it doesn’t always make sense. We’ve seen firsthand over the past several years that the financial case for homeownership isn’t what we thought it was. The public’s perception of whether owning a home is even needed to be a part of the middle class has shifted. Today, less than half of Americans believe owning a home is needed to be considered middle class.

We clearly see these trends showing up in the state of homeownership in America. The most recent report shows the rate at below 65%, which is actually still a bit higher than the rate in the mid-1990s but well below the peak achieved during the housing boom. None of this is to say that homeownership is not a laudable goal or that it doesn’t have benefits. In fact, the distribution of homeownership could be more even so that the benefits are more widespread.

But what we are seeing in the changing landscape is hard to ignore. The Harvard Joint Center for Housing Research recently published projections for renter households showing that the annual growth in renter households over the next decade will be double the typical growth we had been seeing back to the 1960s.

Their projections are helpful to understand what to expect in the market over the next few decades. They are showing that growth will be at both ends of the age spectrum, driven by the aging of the baby boom and Generation Y. Growth in renters is going to be predominantly minority households, particularly Hispanics. And the new renters will be all types of households – couples with and without children, as well as singles.

Where are all these new renters going to live? There has been a huge dip in multifamily construction throughout the housing crash years, only recently picking back up to historical norms. So not only do we have a lot of new renters in coming decades, but we have a bit of a deficit to make up.

And importantly, the Joint Center and other analysts are showing that the share of cost burdened renter households has reached record levels. Half of all renters are at least moderately cost burdened, with rising rents while incomes are still depressed coming out of the recession. People who can’t afford to buy homes are also struggling to pay rent, a situation that heavily drives the concerns and decisions of the new era of renters.

10 PRINCIPLES

Below are 10 principles and related ideas for how we can adjust to the new era of multifamily rental housing.

1: Preserve what’s Already There: First look at what you have before you start to think about creating something new.

2: Support Inclusive Communities Upfront: There are far too many examples of great plans and investments, such as new transit stops, where creating inclusive communities was an afterthought.

3: Change the Dialog Locally: The more people think of renters as neighbors or family the more likely they are to be open to policies and developments that serve them.

4: Make Room for Rentals: Do our communities have room for this kind of housing within current zoning?

5: Simplify the Development Process: Can’t the process be simpler, more predictable, and more affordable?

6: Develop Sustainable and Walkable Communities: The new era will reflect a growing understanding of the importance of sustainability, and a growing desire for compact and walkable communities, even in suburbs.

7: Create a Community Not Just a Building: Renters are looking for “authentic social spaces” within buildings or within walking distance – buildings will need more than an elevator lobby to create a community.

8: Embrace New Technologies: The new era of multifamily rental housing needs to be forward-thinking and innovative, not bogged down by old and out of date building types, construction methods, and technologies.

9: Leverage Financial Innovations: In order for the new era to become a reality lenders and investors can and should be partners in innovation.

10: Develop New Sources of Subsidy: State and local subsidy sources are essential to help fill funding gaps.

Most of these principles are not really new, but the context of changing demographics and market forces makes them more relevant now than in the past. The development industry needs a revitalized focus on these principles, and it needs to bring new and innovative thinking to how to meet them. Using these principles, communities can make changes to help prepare for the future rather than living in the past.