K.C. Kappen and Rachel Ballard believe that renting a
place to live "simply makes sense," given their current situation.
Kappen, 26, a junior account executive for social media
and public relations with the Brownstein Group in Philadelphia, arrived here
with Ballard, 25, from Southern California in June.
Ballard will finish graduate school in the next 18
months, Kappen said, "and I'm in the beginning stages of my professional
career." Renting "gives us a chance to weigh our options and see what
areas of Philadelphia we prefer."
Thousands of other millennials have come to the same
decision, for a variety of financial reasons, so rental apartments continue to
fill a growing housing need in the Philadelphia region.
Real Estate Tools
Although much debate surrounds both the meaning and
duration of this shift from buying to renting among people under 34 -
historically, the quintessential first-time homeowners - it is contributing to
an apartment boom here.
And that boom has given a shot in the arm to the regional
economy, $14 billion in 2013 alone. For the United States as a whole, the
economic contribution was $1.3 trillion.
A study by George Mason University's Stephen S. Fuller
for the National Multifamily Housing Council and the National Apartment
Association showed that 544,300 people, or 9 percent of the Philadelphia area's
population, live in its 321,200 rental apartment units.
Thirty-four percent of those apartments are in buildings
of 50 or more units, Fuller said.
While single-family-home building still lags, multifamily
rental construction accounted for 49 percent of building permits issued in the
region in 2013, valued at nearly $367 million, he said.
Spencer Yablon, senior vice president for capital
markets/multifamily at CBRE Group in Wayne, said apartment fundamentals remain
good and support "near-term growth."
"Rental-rate growth makes for favorable
investment," Yablon said, noting that the continued difficulty of
first-time buyers to qualify for mortgages and an increasingly mobile younger
population benefits the region's multifamily market.
That isn't to say increased demand has made it easier to
build apartments in suburban communities, which have often fought developers in
court.
"It is still difficult getting entitlements in the
suburbs," said Joseph Mullen, president and CEO of the Madison Apartment
Group, in Philadelphia, which opened the 240-unit Madison Providence in
Collegeville to its first tenants last week. "When we can point to other
properties that are professionally run and the upscale resident base, some of
the fears go away."
Borrowing for multifamily projects still comes with low
interest rates, Yablon said, "especially for developers with strong track
records." Property-management companies from outside the area consider the
Philadelphia region an excellent long-term bet.
Adam Mermelstein of Treetop Development, in Teaneck,
N.J., bought the 502-unit Charter Court apartment complex in East Falls for
$47.3 million last year. He said Philadelphia "has similar
demographics" to the New York area, a "healthy" business
district, and a good transportation system.
"We felt that we could build off of the positive
trends that have been going on in Philly relating to the renovations and new
construction that has taken place over the last five years," he said,
adding that Treetop is looking for other possibilities in the city and on the
Main Line.
Multifamily developers and other industry experts believe
what is happening in today's market is very much a long-term trend.
David Della Porta of Cornerstone Properties, in
Villanova, who develops both for-sale and rental units, said the home ownership
vs. rental rate is moving from 70 percent/30 percent to 60 percent/40 percent,
"and maybe beyond."
"The new generation - more mobile, marrying and
having children later - understands that owning a home is not the best
investment," Della Porta said. "It is a good lifestyle choice for
many households but is not the American dream."
Economist Kevin Gillen, who tracks the local housing
market, noted that many millennials don't want to become homeowners because
renting offers "decreased responsibility and greater freedom."
Because of the 2007 market collapse and the prolonged
downturn that has followed, "this is probably the first generation in U.S.
history that is relatively risk-averse when it comes to home ownership,"
said Gillen, chief economist of Meyers Research and senior research fellow at
Drexel's Lindy Institute for Urban Innovation.
Mullen concurred, adding that it "is hard to be
mobile and move to a higher-paying job" if you have to sell a house.
Kappen said he and Ballard would not rent forever.
"A few years ago, the poor state of the economy left
me feeling less optimistic about ever becoming a home buyer," he said, but
new optimism makes him believe that "buying a home will actually be
attainable in the next couple of years."
Rentals Market By
the Numbers
Apartment-industry contribution to the regional economy:
$14 billion
Jobs supported: 131,000
Wages from those jobs: $1.1 billion
Renters: 544,254 (9 pct. of population)
Occupied units: 321,203 (34 pct. in buildings of 50-plus
units)
One-person households: 57 pct.
Average monthly rent: $1,414
Renters' spending: $10 billion contributed to region's
economy
Construction value (including jobs): $852.3 million
(All figures for 2013)
SOURCES: Stephen S. Fuller, George Mason University's Center
for Regional Analysis; SmartAsset
Source: Philly.com
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