This was the mantra shared by Dr. Barry Bluestone, founding Dean of Northeastern University’s School of Public Policy & Urban Affairs, at today’s NAIOP program, The Future of Multifamily – How Demographics Are Driving Development. Barry started off the program with a great presentation on the impact changing demographics are expected to have on Greater Boston’s housing market. Given the national depression in home prices, it was surprising to see that our local apartment rents continued to rise after 2005 and, even with some adjustment due to the recession, today they are only 2% lower than their 2008 peak. This is due in large part to vacancy rates that have remained stable at 6%.
Our rental housing market has remained strong for a number of reasons including: foreclosed homeowners reverting to rental housing; young families holding out for further drops in housing prices or being unable to make the necessary down payment due to new lending criteria; and increased student demand.
On the last point, due to the Boston area’s abundance of colleges & universities, the student population has increased by nearly 24,000 undergraduates and 22,000 graduate students since 2000. And although the schools house over 100,000 undergraduates, nearly 180,000 live off campus. With graduate students, only 8% of them live on campus.
Bluestone was convinced that there are real opportunities for the private sector to provide the needed housing for both undergraduates and graduate students. New housing alternatives for graduate students could include the creation of Multi-University Graduate Student Villages to help take pressure off the urban rental market and help retain young professionals in the city.
At the opposite end of the spectrum, Massachusetts is aging rapidly, with the Baby Boomers projected to represent higher percentages of the population over the next decade. There will be some great opportunities for multi-family housing during the next decades, with some empty nesters looking for smaller, easier to maintain housing, and others choosing to “age in place” in suburban, smaller units, while still others may look to more urban environments with more amenities provided by city life.
The panel that followed Dr. Bluestone included Larry Curtis, President, WinnDevelopment; Wendy Nowokunski, President, The Northbridge Companies; and Doug Straus, SVP, Director Residential Development, National Development.
Some key take-aways included:
- For market rate housing, transit-oriented multi-family is highly marketable.
- Be it subsidized, market, or senior housing, higher quality finishes are now expected as the norm.
- Senior housing is not your “grandfather’s” housing – it is now varied in service delivery, including independent, assisted living, and memory care residences (diminished cognitive capabilities affects more that 40% of those over 85 living in senior housing.)
- Even with state and federal subsidies, new construction is very difficult, leading to more interest from investors in repositioning older properties.
- Green is becoming an expectation, but there is no clear standard as owners market their properties as green. Some owners are focusing on very visible improvements (solar), while not pursuing the more energy saving upgrades.
It appears that the current strong attraction for rental housing in the investment markets is well founded and the prognosis for the future of this product type is a clearly bullish one.