Rental Business Thriving as Homeownership Falls

If the demographics bode well for the for-sale sector of the housing market, the numbers look absolutely smashing for the rental side of the business, according to panelists at PCBC's Multifamily Trends day. For every 1% decline in the ownership rate, there is a corresponding increase in renter households, said Clyde Holland, chief executive officer of the Holland Partner Group, a Vancouver, Wash.-based developer. So, if there is another 2% decline in the ownership rate to a long-term average of 64%-65%, there will be a need for 5.5 million to 5.7 million rental units, he told the conference. "Even if (the potential renters) double up, there will be demand for 2.5 million to 3 million apartments," Holland said. And that's on top of the 3.4 million potential renters in the 18- to 34-year-old age bracket—"the largest cohort since the baby boom of the 1960s"—who will enter the market between now and 2015, Holland also pointed out. "This year alone, some 800,000 persons will enter the rental market, and an even larger number will enter the market next year," he said. Household formations, added Brian McAuliffe, managing director of acquisitions at RREEF, Chicago, "are just as critical as job growth, if not more so," to the apartment sector.