By Julie Smith, President, Bozzuto Management Company
**This article orginially appeared in Delta Associates’ Mid-Year 2013 Mid-Atlantic Class A Apartment Market report.
We have been waiting, patiently, for what feels like a long time now. The Gen Y renters — the ones that have been at the forefront of our development ideas and efforts — have finally arrived. Or at least we are seeing a lot more of them moving into our communities. And not a moment too soon, because we have a lot of new apartments in the Washington region and many more in
That said, from our vantage point, the outlook is very encouraging. The data from our own portfolio clearly illustrates that in the past 12 months there have been fundamental shifts:
- The dramatic increase in the number of new renters in the 20 – 30 age group have grown by more than 16% — shaving about 5 years off the age of the average renter.
- At the same time, the average income of these renters has increased by more than 10%. There are far more renters earning more than $100,000 and far fewer earning less than $50,000. And even with rents that have been steadily increasing since 2010, affordability does not appear to be an issue. In fact, renters across the region are spending far less on rent as a percentage of total income than in other major metropolitan areas across the country. With a strong employment base, Washington looks like a pretty good deal right now.
- While the percent of single person households has decreased, the number of apartments occupied by roommates has increased at twice the rate. Why is that such a good thing? Because those two renters in one apartment are just one raise or job promotion away from becoming renters in two apartments. We have embedded demand in our buildings today.
These renters, with disposable income, are fueling communities where we as developers and investors have placed a very large bet. We bet on the success of new urban and suburban infill projects in urbanizing areas. These new renters are enthusiastically supporting the retailers and restaurants in these burgeoning new neighborhoods, encouraging more of the same. This is creating better and stronger communities and making Washington a better place to live.
And the word must be out; nearly 40% of our applicants are moving in from outside of the Washington region. And they are quickly learning that the District of Columbia is a not only a dynamic place to live, but also one where you can easily live without owning a car. One out of three of our residents are getting by without a car today. Those who use public transportation have increased by 4% in the past year. We should expect to see fewer cars in our garages going forward as Zipcar, Car Share and Uber become household words and frequently used apps. Today, having a Capital Bikeshare at the entrance of your building is considered a great amenity and one that you do not have to fund!
These transitions in taste and spending beg the question: Has the paradigm permanently shifted with this growing group of renters? Are we moving to a society where the notion of owning anything is really overrated? Affordability does not appear to be the root cause in these changes. Instead, young people today appear to value access over ownership; flexibility over permanency. Peer-to-peer software combined with mobile technology allows access to whatever is needed for as long as it is needed. This is true at every level of luxury and quality. The practice has also gone mainstream. The success of companies such as AirBnB, Uber, Zipcar and Netflix, to name a few have changed the way we think about travel, transportation, work, entertainment, and housing. And the “ownership shift” does not belong solely to the Millennial. This ambivalence towards ownership is crossing generational lines, driven more by a change in thinking than anything else. It is a different kind of consumption. For many, it translates into a better quality of life.
So, is the notion of using things that you do not own a new form of freedom? It looks like a pretty smart option from here. As this momentum grows, we find our industry sitting in the catbird seat at the center of this new mindset. And when we are able to leverage our position in this new marketplace to our advantage, it will have been worth the wait indeed.