Residential Multifamily Trends- Through The Eyes Of An Investor

Posted By CIMLS Staff on Apr. 5 2019 at 11:04 PM EST
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Residential Multifamily Trends- Through The Eyes Of An InvestorLet's look at the last ten years from 2009-2019: it has been an extraordinary time to own or invest in residential multifamily properties. During this period, trends favoring strong investment growth have been moving in a positive direction:

Rents have been increasing steadily

Occupancy rates have been well over 95%

Expense growth has been muted

Limits were placed on regulations

How prepared are you for change in investment strategies?

First off, as more new properties come online and many of these units across the county located in low population growth environments, we will be seeing a reduction in occupancy rates and pressure to keep rents low.

Second, with an increase in affordable housing advocates across a broad range of issues, local governments will be forced to respond by enacting laws to control rents and weaken the rights of landlords in general. Local governments will also respond by increasing government funding –and government ownership- of affordable housing in direct competition for the available pool of renters. This shift in public versus private housing will undoubtedly have a negative effect on private ownership, and could convolute the problem of affordable housing even further.

An example of this is in Portland, Oregon where currently there is a push by local government to increase regulations on rent control, limit the ability of landlords to evict problematic tenants and /or to either restrict or eliminate criminal background checks. It is questionable whether placing these restrictions on property owners will increase or decrease the availability of affordable housing, or simply shift multifamily housing ownership from private to public.

Even though Portland, Oregon is just one way that local governments are trying to address affordable housing, there are similar moves are taking place across the county. In the next ten years, profitability of multifamily housing will require the successful investor to navigate through new regulations, over supply and a potential recession. That is the bad news. The good news is that we are still in a healthy economy, and it may be one to three years before we have to face these new realties.