You are reading: Multifamily Housing Trends For 2023
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The multifamily housing industry has experienced a rollercoaster of changes over the past few years. It withstood the 2020 recession better than most property sectors—only industrial held up better—and market deterioration was far less than in previous recessions.
The market isn’t the only thing that’s changed in recent years. The strategies that property managers use to market their properties, attract new renters, and screen their applicants have evolved, too.
2022 was a strong year for the rental market. Rents continued to rise each month and demand was strong. In fact, in March of 2022, we saw an annual growth rate of 15.7%! It was unlike anything we had seen in years.
But, what goes up must come down. Rents have been slowly declining since October of last year. While this may seem like a cause for concern (after all, trending downwards usually isn’t a great sign), what it really means is that rents are starting to normalize. This is welcome news for renters after a few years of skyrocketing prices, but it won’t necessarily translate to lower prices on a national level. Some cities might see more drastic changes in rent prices depending on factors like new supply and local demand, but overall it’ll return to business as usual.
As for vacancy rates, the national rate is sitting at around 6%. While we saw a lower vacancy rate in late 2021 when the multifamily businesses were thriving (around 4.1%), the national average typically sits at around 5% when things are stable. This rate is expected to continue to drop as demand increases throughout Q2 and Q3.
While things have slowed down a bit in the first quarter of 2023, analysts are still confident that demand for rentals will keep things chugging along as long as that pesky labor market stays steady. Don’t worry too much about a downturn — there’s plenty of reason to keep your heads up in the world of multifamily.
Staff Retention Leads to Tenant Retention
Seasoned property managers know keeping good tenants in place comes down to keeping the staff you have. Knowing this will become increasingly important as the market continues to evolve in 2023.
During the era of quiet quitting and the Great Resignation in 2022, we learned that apartment firms with higher staff turnover have lower resident retention rates. According to talent performance solutions provider Grace Hill, every 3% reduction in staff turnover nets a 4% decrease in residents leaving. That means a 15% improvement in employee retention translates into a 20% boost in resident renewals. That’s a benchmark to aim for in the years to come.
Document Fraud is on the Rise
Document fraud is becoming more and more common in recent years, and it’s past time to take it seriously. The issue? Tenants are getting savvy and are altering their bank statements and paystubs to make it appear as though they meet your income requirements, even if they don’t. If they themselves don’t know how to do it, there are a ton of shady companies who will do it for them at a low cost.
But there’s good news too: Snappt has developed a screening platform that can detect these fraudulent documents right off the bat, saving you a potential world of headaches down the line.
Whether you’re a property owner or a prospective renter, keeping an eye on the latest property trends can be the difference between success and mediocrity. Here are a few key trends we’re keeping our eyes on as we continue through 2023.
With more and more people focused on reducing their carbon footprint, it’s no surprise that sustainability is becoming a major trend in the housing industry. From energy-efficient appliances to composting bins, renters are looking for a variety of eco-friendly features that can help reduce their impact on the environment.
Hybrid Living Spaces
Ever since the start of the COVID-19 pandemic, remote work has remained popular. Many renters are looking for housing options that can accommodate their changing work habits. This might include more spacious floorplan options so they can keep their workspace and living space separate. We’ve also seen a rise in “hybrid” living spaces, which combine traditional living areas with designated workspaces. Some complexes may even include a coworking space for their tenants.
From smart thermostats to tricked-out security systems, smart technology has officially arrived in the multifamily industry. Tenants are looking for properties that offer advanced tech to help make their lives easier and safer. Think about adding remote-controlled locks, smart lighting, or temperature control to your units.
Electric vehicle charging stations are also becoming a need for many renters. These environmentally friendly cars are on the rise, especially in states on the west coast. Adding these stations not only shows that you want to provide useful amenities to your residents but also that you care about the environment.
Location, Location, Location
As cities continue to expand, renters are becoming increasingly focused on finding housing options that are close to the places they love. Whether it’s a vibrant downtown scene packed with trendy bars and restaurants or a quiet suburban neighborhood close to parks, renters want to live in areas that reflect their lifestyles and priorities. It’ll be more important than ever for property managers to market their properties in a way that can highlight the features of the surrounding neighborhoods.
If you haven’t heard by now, pickleball is the next up-and-coming sport that’s sweeping the nation. We’ve already gone over how important resident retention is, so what better way to hold on to great tenants than to build a court that will provide endless entertainment? Pickleball is a sport popular amongst everyone, from your 60-something grandfather to spry 15-year-olds looking to pass the time. With its looming admission into the Olympics, we don’t see this sport going anywhere anytime soon.
To Sum Up…
As we progress through 2023, the multifamily rental market will continue to experience change. While experts predict a slowdown in demand during the first half of the year, a rebound is expected in the second half. Property managers should stay on top of rising trends to remain competitive and attract great tenants. Lastly, don’t forget to keep an eye out for document fraud in rental applications and invest in advanced screening platforms like Snappt!