The Expanding Housing Universe: Navigating New Competition in Multifamily

The multifamily rental market has long operated within familiar competitive boundaries. Property owners and operators traditionally focused on outperforming neighboring residential communities with superior locations, more attractive amenities, competitive rental rates, and better service. Success meant understanding local market dynamics, investing strategically in property improvements, and maintaining operational excellence.

But, what we’re dubbing “the expanding housing universe” now presents a fundamentally different challenge. Multifamily property operators face competition that requires a broader perspective and more nuanced strategies. While traditional competitive pressures remain, a new set of challengers has emerged. Competition like parents' spare bedrooms, single-family rental communities, and an evolving landscape of short-term and tech-driven housing solutions. To stay ahead, property owners must think beyond their traditional playbook.

In this blog we’ll cover:

• How today's housing landscape has expanded beyond traditional multifamily competition.
• Why parents' spare bedrooms, short-term rentals, and build-for-rent communities are reshaping the market.
• Effective strategies for multifamily operators to compete with these emerging alternatives.

At a Glance: Understanding the Broader U.S. Housing Landscape

Before we can assess the multifamily rental market, it’s important to understand the nature of today's broader housing landscape, which requires looking beyond traditional metrics. While the Census Bureau's latest homeownership rate stands at roughly 66%, that figure tells only part of the story.

As noted in the chart above, the divergence is quite pronounced among younger adults. For those aged 25-34, the individual homeownership rate is at 33%, a full 10 percentage points below the household-level rate. This gap illuminates a crucial trend – that the homeownership reality for individual Americans, especially younger ones, is quite different from their predecessors.

Several factors are driving a shift toward renting:

• Persistent affordability challenges in both rental and for-sale market – recent analysis indicates it’s 38% more expensive to buy than rent.
• High interest rates impacting mortgage affordability.
• Student loan debt burden affecting younger generations.
• Changing lifestyle preferences and delayed household formation.
• Economic uncertainty influences major purchase decisions.

While homeownership is still the majority in the United States, recent data shows a greater shift towards renting, with the share of renters growing three times faster than homeowners. However, this doesn't automatically translate into smoother sailing for multifamily operators.

The sector's performance remains heavily influenced by construction costs, interest rates, and broader economic stability. Additionally, today's renters have more options than ever before. Understanding the different types of emerging competitors and being able to adapt to outperform them is crucial for success in today's expanding housing universe. Let's examine each of these new competitors in detail.

1. The "Shadow Market" of Parents with Spare Bedrooms

The industry is facing an unexpected but increasingly significant competitor: parents with spare bedrooms. This is the first of three multifamily competitors that we’re going to look at in depth. Recent data reveals a striking trend; seniors with two or more spare bedrooms now represent a growing share of all owner-occupied housing in America, creating a "shadow market" that directly impacts traditional rental demand.

The amount of opportunities that younger adults have today to live at home with their parents is growing, not just because they're facing affordability challenges in the market, but also because there's actually a tremendous number of spare bedrooms that older Americans in larger homes with smaller households are sitting on. This trend is reshaping traditional assumptions about the rental market's core demographics.

Driving Forces Behind the Trend

The rise in adult children living with their parents is driven by a mix of economic challenges, changing social norms, and shifting demographics. Property operators need to recognize these driving forces in order to adapt successfully:

1. Aging in Place: The current generation of seniors is increasingly choosing to remain in their family homes rather than downsizing. This means larger homes remain under utilized for longer periods.
2. Empty-Nest Economics: As children move out, parents are left with substantial unused space. Unlike previous generations who might have downsized, many of today's empty-nesters are maintaining larger homes, creating a permanent reservoir of potential housing for adult children.
3. Economic Pressures on Young Adults: Rising housing costs, substantial student loan debt, and sluggish wage growth have made homeownership increasingly challenging. Economic uncertainty, job market volatility, and delayed career advancement further compound financial strain.
4. Changing Social Norms: The stigma once associated with living with parents has significantly diminished, particularly post-pandemic, making this option more socially acceptable for young professionals.

Market Impact

The potential implications for multifamily are significant. Extended cohabitation periods are becoming increasingly common, with adults in their late twenties and early thirties, traditionally prime renting age demographics, choosing to live with parents rather than enter the rental market. This trend is directly contributing to delayed household formation, which can impact occupancy rates across numerous markets.

How Multifamily Operators Can Compete

Competing with free or low-cost housing can be tough, but smart multifamily operators can use creative strategies to stand out and attract renters moving out of their parents' homes:

• Offer Financial Flexibility: Provide short-term, flexible leasing options and first-time renter incentives designed for young adults transitioning from their parents' homes.
• Emphasize Independence & Growth: Highlight the personal and professional benefits of independent living, including networking opportunities and the ability to build rental history.
• Create Community Value: Parents' homes may be free, but they lack the social environment and lifestyle amenities that apartment communities provide. Leverage this through regular events and community programming.
• Streamline the Transition: Implement easy application processes, roommate-matching services, and move-in support to make the switch from home as smooth as possible.
• Focus on Young Professional Needs: Offer amenities that specifically appeal to career-focused young adults, such as co-working spaces, high-speed internet, and professional networking events.

2. Short and Mid-Term Rentals

The short-term rental (STR) market has evolved from casual home-sharing into a highly professionalized sector that competes directly with traditional multifamily properties. Platforms like Airbnb and VRBO fueled this transformation, offering travelers, corporate relocators, digital nomads, project-based contractors, and temporary residents an appealing alternative to long-term leases. As STR offerings continue to grow, multifamily operators face new challenges in attracting and retaining residents.

Since the pandemic, the STR market has undergone dramatic shifts that have impacted multifamily rentals. Initially, travel restrictions forced many STR owners to transition their units to long-term rentals, temporarily increasing multifamily housing supply. However, as travel rebounded, STR demand surged, with record-high listings in 2022. This resurgence, coupled with rising professionalization, has intensified competition, particularly in urban and resort markets.

Driving Forces Behind STR Popularity

Several key trends have contributed to the rapid growth and appeal of STRs:

• Regulatory Adjustments: While some cities have cracked down on STRs (such as New York’s restrictive laws) operators have adapted, improving service standards and aligning with regulatory frameworks to remain competitive.
• Growth of Mid-Term Rentals: The fastest-growing STR segment is now 30-120 day stays, targeting corporate relocations, traveling professionals, and extended-stay visitors; an overlapping leasing demographic that many multifamily rentals also pursue.
• Professionalization of Operators: Large-scale STR managers now oversee entire buildings or portfolios, offering hotel-like services, standardized amenities, and a consistent brand experience that rivals traditional apartment communities.
• Amenity Expansion: STR properties increasingly include apartment-style features, such as fitness centers, co-working spaces, and concierge services, narrowing the distinction between short-term rentals and traditional multifamily living.

Market Impact

The rise of STRs has reshaped renter expectations and market dynamics in several ways:

• Increased competition for flexible-lease residents.
• Pressure on traditional pricing models.
• Rising demand for furnished and semi-furnished options.
• Higher expectations for amenities and services.
• Changing perceptions around lease commitments, with more renters seeking short-term flexibility.

How Multifamily Operators Can Compete

To counteract STR competition, multifamily operators should consider adapting by offering flexibility and enhancing resident experience in the following ways:

• Strategic Lease Options: Introduce short-term and furnished lease options to attract corporate clients, remote workers, and transient professionals.
• Highlight Stability & Cost Benefits: Emphasize the predictability of long-term leases compared to STRs’ fluctuating prices, cleaning fees, and seasonal rate spikes.
• Enhance Service Offerings: Implement hotel-inspired features such as digital check-ins, package management, and concierge services to improve the resident experience.
• Develop Corporate Partnerships: Establish relationships with local employers and relocation services to secure a steady pipeline of business travelers and relocating professionals.

3. Build-for-Rent Communities

The build-for-rent (BFR) segment has rapidly emerged as another strong competitor to traditional multifamily properties. These purpose-built single-family rental communities offer residents a blend of homeownership benefits and rental flexibility. With detached or attached homes, private outdoor spaces, and full-service property management, BFR communities cater to renters seeking more space without the financial or long-term commitments of buying a home.

BFR growth has accelerated in suburban markets, particularly in high-growth areas where housing demand outpaces supply. As more renters prioritize space and privacy, BFR communities have become a highly attractive alternative to conventional apartment living, putting pressure on multifamily properties to adapt.

Driving Forces Behind BFR Popularity

Several factors have fueled the rise of BFR communities:

• Desire for a Home-Like Environment: Renters, particularly families and remote workers, are drawn to larger floor plans, private yards, and lower-density living.
• Professional Management: Unlike traditional single-family rental homes, BFR properties are operated by institutional landlords, offering professional maintenance, leasing services, and community management.
• Lifestyle Amenities: Many BFR communities include clubhouses, pools, fitness centers, and walking trails, which were previously more common in multifamily properties.
• Flexibility Without Ownership: Residents can enjoy a suburban, home-like lifestyle without the burden of a mortgage, property taxes, or long-term financial commitment.
• Strategic Suburban Growth: Developers are targeting fast-growing suburban corridors like the Sunbelt where home prices have surged, attracting renters priced out of homeownership.

Market Impact

The expansion of BFR communities is shifting renter expectations and placing new pressures on multifamily properties:

• Increased competition for family-oriented renters.
• Greater appeal to pet owners and remote workers seeking more space.
• Rising demand for larger floor plans in traditional apartments.
• Higher expectations for private outdoor space and storage.
• Greater importance placed on parking availability.

How Multifamily Operators Can Compete

Multifamily operators can stay ahead of the competition by leveraging their unique strengths to differentiate themselves from Build-for-Rent (BFR) communities. Here's how:

• Leverage Urban Advantages: Highlight walkability, proximity to employment centers, and access to dining, entertainment, and cultural amenities that suburban BFR locations can't match.
• Enhance Community Programming: Foster a strong sense of connection through social events, networking opportunities, and lifestyle experiences that are harder to replicate in dispersed BFR settings.
• Showcase Convenience & Services: Emphasize superior maintenance response times, on-site management, and convenient amenities like package lockers, fitness centers, and coworking spaces.
• Focus on Value Proposition: Position your community as a cost-effective alternative to BFR, with lower rents, fewer commuting costs, and no need for additional expenses like yard maintenance.
• Target Urban Professionals & Young Renters: Appeal to those who prioritize location, social opportunities, and easy access to city life over extra square footage.

How to Remain Competitive in the Expanding Housing Universe

As multifamily operators navigate an evolving market, success hinges on a strategic, adaptable approach. While competition from the continues to grow from the sources we’ve outlined earlier, several core principles can help properties stand out and retain strong demand:

• Know Your Competitive Landscape: Look beyond traditional competitors. Analyze how short-term rentals, build-for-rent communities, and alternative housing models impact your market. Understanding their strengths and weaknesses will help refine your positioning.
• Differentiate Through Value: Multifamily communities can offer unique advantages like urban proximity, community-driven living, professional management, and cost predictability. Clearly communicating these benefits helps attract and retain residents.
• Offer Strategic Flexibility: Compete with alternative models by providing lease options that balance stability with convenience. Consider integrating furnished units, mid-term leases, and corporate housing solutions that can help capture demand from more transient residents.
• Enhance Resident Experience: From hotel-inspired services to high-tech conveniences, multifamily operators must elevate the living experience. Smart home technology, concierge-style services, and vibrant community programming create a compelling lifestyle alternative.
• Adapt and Diversify: Rather than viewing new housing models solely as competition, consider strategic opportunities, whether through partnerships, flexible leasing structures, or portfolio diversification, to align with shifting renter preferences.

Apartment List: Your Key to Thriving in the Expanding Housing Universe

The multifamily rental landscape has evolved beyond traditional competition, that now includes parents' spare bedrooms, short-term rentals, and build-for-rent communities. To stay ahead, operators must adapt with agility, understanding market shifts, offering flexible solutions, and emphasizing the unique advantages of multifamily living.

Success lies in turning these challenges into opportunities by delivering unmatched value through convenience, community, and tailored amenities. Apartment List’s AList-Nurture Leasing AI helps multifamily operators attract and convert prospective renters. Whether targeting those leaving home, transitioning from short-term rentals, or comparing options, our AI-driven platform connects you with the right prospects.

Contact Apartment List today to see how our solutions keep prospects connected through timely, relevant communication – achieving an average contact-to-move-in time of just 46 days.