The U.S. Apartment Market A $1.3 trillion industry Doug Bibby, July 2016
WHO WE ARE! National trade association with 1,200 member companies! Members are the apartment industry s largest owners, managers and developers, as well as the top lenders, investors, brokers and suppliers that serve them! Areas of focus include:! Federal advocacy! Strategic business information! Industry research & market trends! Public relations & communications! NMHC hosts five major events each year for the membership 2
HISTORY In 1900, 75% of urban Americans lived in an apartment 3
HISTORY After WWII, the highway system spurred suburban growth and homeownership expanded 4
HISTORY Urban decay spurred the U.S. government to build public housing for low-income families 5
HISTORY The advent of purpose built, professionally managed apartments began in the 1980s, creating the model of today s multifamily market 6
APARTMENTS TODAY 38M apartment residents 20.1M apartment homes 12.3M jobs supported $1.3T economic contribu8on 7
WHO RENTS? Renters 37% Owners 63% Source: U.S. Census Bureau, 2014 American Community Survey
WHAT DO RENTERS LIVE IN? [PERCEN TAGE] [PERCEN TAGE] [PERCEN TAGE] [PERCEN TAGE] Single-Family 2 to 4 Units 5+ Units Mobile Homes Source: U.S. Census Bureau, 2014 American Community Survey
WHO OWNS? 90 80 70 60 50 40 30 20 10 0 1982 1986 1990 1994 1998 2002 2006 2010 2014 Less than 25 25 to 29 30 to 34 35 to 44 45 to 54 55 to 64 65+ Source: U.S. Census Bureau, Housing Vacancy Survey Homeownership Rate by Age Group
WHO RENTS? 18% 26% Under 30 Years Old 30-44 Years Old 27% 29% 45-64 Years Old 65 Years or Older Source: U.S. Census Bureau, 2014 American Community Survey
WHO WILL RENT? 1.5 1.0 0.5 0.0-0.5 Change in Renter Households (millions) -1.0 Under 25 25 29 30 34 35 39 40 44 45 49 50 54 55 59 60 64 65 69 70 74 75 and Over Age Group 2005 2015 Projected 2015 2025 Notes: Projected renter growth assumes constant homeownership rates by age, race, and household type. Constant rates are the average of rates from 2014 and 2015. Historical growth uses 3-year trailing annual averages to reduce volatility.. Sources: JCHS tabulations of US Census Bureau, Current Population Surveys and 2013 JCHS household growth projections 12
WHO WILL RENT? 25,000 18- to 34-Year-Olds Living with Parents 20,000 (Thousands) 15,000 10,000 5,000 - Source: U.S. Census Bureau
WHO WILL RENT? 61% Growth in number of renters in the top 10 percent of income earnings (2005-2015) Source: Harvard Joint Center for Housing Studies 14
FINANCING Short-term construction loan Payments Money from long-term loan Apartment Owners $ $ Ownership share 20.1M Long term loan request apartment $ homes Long-term loan Investors $1.3T Hold Syndicate Enhance Sell Securi8ze 15
FINANCING Mortgage Debt Outstanding ($B) $57 $118 Private providers Banks $377 $1.1 Trillion $398 Life Insurance Cos. Government GSEs $108 $62 CMBS Source: U.S. Census Bureau, 2014 American Community Survey
FINANCING 80% 70% 60% 50% 40% GSE Market Share (%) apartment residents 20.1M MF Production Volume ($B) apartment homes $300 $250 $200 $150 30% 20% 10% 12.3M jobs supported $1.3T economic contribu8on $100 $50 0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 $- 17
APARTMENT SALES $160,000 $140,000 $120,000 (Millions) $100,000 $80,000 $60,000 $40,000 $20,000 $0 2001 2005 2009 2013 Source: Real Capital Analytics
APARTMENT BUYERS Cross-Border 13% Private 56% [CATEGORY NAME] [PERCENTAGE] Institutional/Equity Fund 25% Public 5% Source: Real Capital Analytics
APARTMENT INDUSTRY 1. Developers Responsible for the land acquisition, development and construction of apartments 2. Owners Invest in individual assets and organize the underlying financing 3. Managers Take care of the day-to-day on-site operations, including marketing, leasing and maintenance 20
CONSTRUCTION 900 800 700 Annual Mul8family Comple8ons (Thousands) 600 500 400 300 200 100 0 1968 1973 1978 1983 1988 1993 1998 2003 2008 2013 Source: U.S. Census Bureau
CONSTRUCTION 9% 7% Real median rental costs Real median renter incomes Source: Harvard Joint Center for Housing Studies 22
APARTMENT OWNERS 5-49 Unit Properties 50+ Unit Properties Individuals Private REIT (Public Company) Nonprofits Other [VALUE] 5% [VALUE] [VALUE] [VALUE] [VALUE] [VALUE] [VALUE] [VALUE] [VALUE] Source: NMHC tabulations of 2012 Rental Housing Finance Survey microdata. US Census Bureau
APARTMENT MANAGERS Marketing Leasing Website Retrofit and maintenance Landscaping Mail and package delivery Rent setting and collection Regulatory compliance Data security Health and safety 24
OWNERS VS MANAGERS 25
OWNERS VS MANAGERS 26
OWNERS VS MANAGERS 27
APARTMENT MANAGERS 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% NMHC 50 Managers Share of Stock 1990 1994 1998 2002 2006 2010 2014 Source: NMHC, Kingsley Associates.
APARTMENTS TODAY Apartments come in all shapes, sizes, and types Urban, Suburban, Ex-Urban Low rise, Mid Rise, High Rise Wood Frame, Steel, Concrete Stand-alone, Mixed-use Affordable, Student Housing, Senior Housing 29
GARDEN APARTMENT 30
WRAP BUILDING 31
PODIUM 32
MID-RISE 33
HIGH RISE 34
WHAT RESIDENTS WANT Source: 2015 NMHC/Kingsley Associates Resident Preferences Survey 35
TOP TRENDS Mobile In-unit cell connectivity is becoming a bigger issue as more people forgo landlines Fitness Centers Today s fitness centers are state of the art and there s a move toward more fitness programming Packages As online shopping continues to grow, figuring out how to handle the packages on site is becoming a bigger management issue Pets Apartments are moving beyond just being pet friendly to catering to the pet owner 36
MOBILE 91% of respondents reported using their cell phone all the time 53% have tested connectivity when shopping for an apartment 98% say good cell phone reception is important 37
FITNESS CENTERS 38
PACKAGES Source: 2015 NMHC/Kingsley Associates Resident Preferences Survey 39
PACKAGES 40
PETS 41
LESSONS LEARNED! Private capital should be emphasized in financing multifamily, but will leave the market when risk/return ratio turns against it - Role of government vital as steadying influence/source of capital! Government role also important to foreign sources of investment that need reassurance about loss of capital! Underwriting risk is of paramount importance in residential real estate finance. - Did not happen in single-family sector, with disastrous results - No taxpayer liability in multifamily! The combination of private capital in first loss position and ultimate government backstop was greatly reassuring to investors in U.S. and around the world. 42
THANK YOU www.nmhc.org www.weareapartments.org Doug Bibby President, NMHC dbibby@nmhc.org 43