While Millennials are the largest generation by population and the largest group of homebuyers, the 25-to 40-year-old demographic also faces some of the steepest challenges to buying a home.
The net result: Many Millennials are opting to rent longer than previous generations, leading to new trends in multifamily housing developments.
COVID-19 and remote work has attracted a growing number of coastal and big city residents to relocate to West Michigan, tightening an already short regional housing supply. Renting has also become more common among age groups that are traditionally more likely to own their home, according to a 2020 report by the Joint Center for Housing Studies at Harvard University.
West Michigan real estate experts say the multifamily real estate market is adapting to the changing lifestyles and amenities favored by Millennials and younger renters.
Stoneleigh Companies President Rick Cavenaugh, who is working to turn the former Lincoln Country Club golf course in Walker into a mixed-use development, told the Walker City Planning Commission recently that families with children are increasingly living in apartments. Meanwhile, multifamily developments need to have amenities to accommodate that, he said.
Median home prices nationwide have increased 15 percent since the end of 2020, according to the National Association of Realtors.
“It’s great if you own a house and you want to sell it, but it’s expensive if you want to buy a house,” Cavenaugh said. “As housing prices continue to go up, renting demand goes up because it becomes an alternative.”
Tight market, challenges
West Michigan’s rental market has high occupancy and is not adding enough supply because of the high costs of construction, said Matt Jones, associate vice president at Colliers International’s West Michigan office. The pandemic has also caused an influx of people relocating to the region from out of town, he said.
“Grand Rapids was the beneficiary in some ways of COVID-19 as people realized they can work from anywhere,” Jones said.
There’s also widespread evidence of large numbers of bids coming in for houses when they hit the market.
“I think there are a lot of people who say we’ll just rent because of that,” Jones said, adding that younger generations are also trending toward more flexibility and away from homeowner responsibilities or being tied to one location.
Younger generations are also confronting challenges related to job security and student debt limiting the ability to qualify for a home loan, said Scott Nurski, senior multifamily investment specialist at NAI Wisinski of West Michigan.
In 2020, the nationwide total student loan debt balance increased 8.28 percent — the largest increase in the student loan debt balance since 2013.
Rental properties are increasingly catering to Millennials and Baby Boomers with specific amenities, Nurski said. While the generations have divergent needs, some commonalities include connectivity and social interaction, he said.
Multifamily developments are offering more common space inside and outdoors, while some developments are equipped with elaborate clubhouses, business centers, coffee lounges and dog parks, Nurski said.
In the next few years, multifamily developments are expected to take dog-friendly amenities to “the next level,” Jones said.
“Especially as we’re seeing Millennials waiting longer to have kids or get married, you’re not always going to need a two-car garage or big back yard,” said Ryan Kilpatrick, executive director of Housing Next, which works with local governments, nonprofits and developers on housing strategies. “Unit size and maintenance obligations are going to be very different going forward and as we see what options home ownership still provides.”
Many younger households prioritize proximity to public transportation, restaurants and the ability to walk somewhere to meet up with friends, Kilpatrick said.
HOM Flats is a West Michigan multifamily housing developer that has leaned into and built a brand around catering to younger households, Kilpatrick said.
“When you become a resident at one property, you get amenities at all properties in the region,” Kilpatrick said. “I think it’s an interesting approach for both that generation and that income segment, offering a sense of community with a lifestyle brand.”
Homeownership is key to building generational wealth, which could pose a long-term problem for families that opt to rent instead of buy a home. Kilpatrick said converting multifamily rentals to a condominium style of ownership is a housing option that hasn’t yet been fully tapped in West Michigan.
“The multifamily industry is very data driven, so they are very tapped into what the changing demands are,” Nurski said.
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