Gen Z

In this May 27 issue of the Multifamily Edge newsletter, we explore the role of Gen Z in the multifamily market.


In this week’s issue, we explore the role of Gen Z in the multifamily market.

This Week’s Top Headlines

We start off with the week’s multifamily insights and then dig deeper into what the Gen Z demographic means for the multifamily market. Let’s start with the top multifamily stories from this week.

  • Biden: The President’s new housing plan will dramatically increase the production of mobile homes, backyard flats, and other manufactured units — Bloomberg
  • Opinion: Blame local zoning not Wall Street for this housing crisis — SmartCitiesDive
  • Downward Sentiment: NAHB’s Multifamily Production Index (MPI) and Multifamily Occupancy Index (MOI) both dropped in Q1 2022 — NAHB
  • STRs: Airbnbs now outnumber apartments in New York City — Bloomberg
  • Rent Wars: Evidence is mounting that rental bidding wars are now a thing — Curbed
  • Top Markets: Here are the top 10 multifamily markets by sales volume from 2021 — MHN
  • Dry Powder: Q1 sales volume for multifamily sat at $63 billion, however dry powder liquidity sitting on the sidelines is currently at a record $250 billion — Globe St
  • Negative Leverage: Is as widespread now as it was during the subprime crisis — TRD

Gen Z

Main Takeaway: Due to the rise in the Gen Z tenant profile, multifamily investors should be re-considering amenity preferences, markets, and exposure to single-family rentals. As good asset managers, we should always be adjusting to our customer preferences, if we didn’t we’d all still offer black and white TV and dial-up internet.

Story: Gen Z, born between 1997 and 2012, is the largest growing demographic in America. It’s therefore critical for multifamily investors to understand how this impacts their assets and services.

Total us population by age and generation
Source: Knoema

Currently, Gen Z makes up approximately 18% of the renter population, with millennials at 37%. By 2025, these two age groups will share about 32% each of the renter demographic, with Gen Z overtaking millennials by 2030, at 46% to 26%, respectively. This is a massive demographic shift in the typical renter profile. 

With that in mind, here are a few key data points that multifamily investors should consider as they future-proof their portfolios to demographic shifts.

  • Digitally Native: Gen Z’s were born into technology, so it’s no surprise that their top amenity preference is reliable high-speed internet. Further, top priorities for Gen Z include guaranteed parking, security, and access control amenities.
  • Green Appeal: As Gen Z ages and becomes wealthier, they will pay a premium for spaces that share their environmental and sustainability values.
  • Space Matters: 43% of Gen Z survey respondents said they would prefer single-family to apartment living. Townhomes, garden communities, and other alternative rental spaces will be favored among Gen Z. 
  • Rent Before Owning: In a Freddie Mac survey of Gen Z, 82% of respondents said they want to eventually own a home but 92% believe that prices are “significant hurdles” to homeownership.
  • Location, location, location: According to the Washington Post: “Gen Zers prefer to live in vibrant suburbs, and while suburban living is nothing new, today’s hybrid world makes for a more feasible transition to the less-populated and more affordable residential areas.”
  • Communication: Gen Z does not want to have a phone call, they want to text or direct message on social media.
  • Applications: The share of rental applications by demographic shows a strong increase in the Gen Z rental profile. 
Change in share of renter application by generation 2021 v 2022
Source: Rent Cafe

Expert Take

“Big cities are appealing for a host of reasons—big cities offer diverse job opportunities. Big cities offer many amenities that are not available in smaller cities or rural areas, from dining and entertainment options to public transit, to services like gyms and spas. And big cities offer opportunities for social networking—whether Gen Zers are looking for professional colleagues to bounce ideas off of, or romantic partners, they’re more likely to find someone to connect with, in a big, dense city.” — Nicholas Dempsey, Associate Professor of Sociology at Eckerd College

Chart: Mortgage Demand

Mortgages for new home purchases dropped 10% in April, according to the Mortgage Bankers Association (MBA).

MBA and census estimates of new home sales
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