Apartment building investors should be looking at renovation, value add and repurposing deals according Freddie Mac’s David Brickman, EVP for Multifamily Business. In an Executive Perspective note published last week Brickman covered these points:
- Demographic forces alone could create as many as 4.7 million more renter households by 2023.
- That even the 3.1 million new units expected over the next 10 years will not be enough to meet demand.
- Compounding the issue, the existing rental housing stock is aging. Nearly 60 percent of U.S. rental properties with 20 or more units were built before 1980.
- Supply already could be 1.5 million
apartments short, by some estimates.
- Nearly 6 percent of all units are retired each year; almost double that number for lower-income units.
- Modernizing existing units could help keep them viable.
- Modifying units could help better meet evolving needs. For example adding amenities that promote working from home or increasing storage space, especially for Baby Boomers who previously owned homes.
- Some enhancements could help preserve not only the units themselves, but also the subsidies – such as Low-income Housing Tax Credits (LIHTC).
- Modernizing, rehabilitating, and preserving existing units typically costs less than building new ones and benefits tenants as well as the property developer/owners and the surrounding communities.
- Boosting overall multifamily rental-housing inventory – through more emphasis on rejuvenating existing units in addition to new construction – would help close the supply gap and offer more housing options.
See the whole Executive Perspective here.