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A just released Harvard study reports the share of renters who spend more than half their income on housing—26 percent or 10 million people--is at its highest level in 50 years. That’s a result of dropping incomes and a surge in demand, which has pushed up rents in many markets. Supply shortages are especially evident in the affordable rental housing sector where developers now have the opportunity to accelerate new building.
But apartment owners also are benefitting across the pricing spectrum as more cash strapped folks grapple with foreclosures or cannot meet stricter lender requirements for financing home purchases. According to the Harvard study, which is based on 2009 Census data, 7.5 percent of moderate-income renters—twice as many as ten years ago--must allot more than half their income on rent. The numbers could be even higher today based on continuing housing market distress and the slow pace of economic recovery. Between 2007 and 2009 during the depths of the recent recession, the number of renters nationwide increased 8 percent, and rents rose 3%, according to Census numbers reported in the Washington Post.
It’s just more evidence that apartments offer the best opportunities for investors in the near term. And if you’re betting like I do that the market for for-sale homes will be like death-warmed over for next five to ten years, apartments will likely outperform every other property sector through the new cycle on a risk-adjusted basis—but then what else is new? Apartments always do better—the current market conditions will only enhance their returns.
On another topic—I can’t resist commenting about Donald Trump’s faux Presidential campaign. I normally refrain from discussion of industry people in the blog, but Donald is so over exposed I’ll make an exception. Having worked with him on marketing his first signature project Trump Tower on Fifth Avenue ages ago (he grabbed my slogan “The World’s Most Talked About Address”), he’s unquestionably the real estate world’s most unabashed self-promoter and branding genius maybe of all time. I guess this is no news either.
One afternoon back then (1982-83), I met with him on something. That day he had just announced the purchase of the New Jersey Generals football team. The New York Post was still publishing in the afternoons and he was flipping the paper over from the front to back pages—both had large pictures of him displayed from the news conference. “You can’t get this kind of attention putting up buildings,” he muttered. “If I had known this before, I would have done this a lot sooner.”
He does the World Wide Wrestling shows and has the TV series, and can’t resist any camera or appearance—all in the name of promoting the Trump brand. In Donald’s view, almost any attention is good attention for helping his business and making him money. But Trump is a real estate guy and entrepreneur—he’s in it for the deal-making game and he is smart enough to know that actually running for President takes him off that field and stunts his business pursuits. In the meantime, he can fuel his publicity bandwagon through birther-babblings and pump up TV ratings or other ventures. Of course, there is no way he actually gets in the race.
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Jonathan D. Miller
A marketing communication strategist who turned to real estate analysis, Jonathan D. Miller is a foremost interpreter of 21st citistate futures – cities and suburbs alike – seen through the lens of lifestyles and market realities. For more than 20 years (1992-2013), Miller authored Emerging Trends in Real Estate, the leading commercial real estate industry outlook report, published annually by PricewaterhouseCoopers and the Urban Land Institute (ULI). He has lectures frequently on trends in real estate, including the future of America's major 24-hour urban centers and sprawling suburbs. He also has been author of ULI’s annual forecasts on infrastructure and its What’s Next? series of forecasts. On a weekly basis, he writes the Trendczar blog for GlobeStreet.com, the real estate news website. Outside his published forecasting work, Miller is a prominent communications/institutional investor-marketing strategist and partner in Miller Ryan LLC, helping corporate clients develop and execute branding and communications programs. He led the re-branding of GMAC Commercial Mortgage to Capmark Financial Group Inc. and he was part of the management team that helped build Equitable Real Estate Investment Management, Inc. (subsequently Lend Lease Real Estate Investments, Inc.) into the leading real estate advisor to pension funds and other real institutional investors. He joined the Equitable Life Assurance Society of the U.S. in 1981, moving to Equitable Real Estate in 1984 as head of Corporate/Marketing Communications. In the 1980's he managed relations for several of the country's most prominent real estate developments including New York's Trump Tower and the Equitable Center. Earlier in his career, Miller was a reporter for Gannett Newspapers. He is a member of the Citistates Group and a board member of NYC Outward Bound Schools and the Center for Employment Opportunities.
