Multifamily Housing: How is it Affected by COVID-19? (for Home Builders & Developers)

4-min read 

Learn about updates to design, governmental aid, investments and technology to understand the impacts of COVID-19 to multifamily housing.

Before COVID-19 multifamily housing was on the rise. In fact, 2019 was the sixth year in a row where multifamily absorption has exceeded 250,000 units. It’s important to note that millennials make up a large portion of this multi-family housing demand. Multifamily housing ended 2019 strong, but what are the impacts from a global pandemic COVID-19?

COVID-19 marks an unprecedented time for not only the real estate market but for humanity. Many are working from home now and have become extremely conscious about maintaining a healthy lifestyle such as encouraging everyone to wash their hands, avoid large groups of people, and protect the elderly.

While all of those safe practices will definitely help to flatten the curve, you are still responsible for running your home builder or developer business. If you primarily build multifamily residences, then I encourage you to continue reading about how multifamily housing is impacted by this global virus. 

4 Impacts of COVID-19 for Multifamily Housing: 

1. Change in Design Preferences 

Let’s face it – no one wants to be quarantined in a 500 square foot apartment. Even the most luxurious of multifamily properties had to limit their amenity usage for their residents. Not only will the demand for single-family homes increase, but the demand for changes in multifamily designs will also increase. Here are some changes to design preferences buyers want: 

• Improving the air-quality for multifamily properties to combat any respiratory diseases and pollutants.
• Incorporating small yards to multifamily units such as horizontal housing to give people more space and to socially distance.
• Adding more sanitizing stations in commonly shared areas such as the clubhouse and gyms within the complex or community.
• Heavy emphasis on having a “healthy home” for conscious individuals and families. Examples include keeping your home dry, clean, safe, and well-ventilated.

You will see more and more home builders and developer companies incorporate these design concepts in the years to come.

2. Shifts in Unemployment & Governmental Aid 

It’s an unfortunate truth that people are losing their jobs from COVID-19. In the two weeks following the national emergency declaration, 10 million individuals filed jobless claims. Since the multifamily sector forms the bedrock of the urban workforce, it was greatly impacted by job losses and the ability to pay rent. Let’s discuss further:

• Job losses impact rental leases significantly for those working in industries dependent on consumer spending such as food services, retail goods, personal services, and tourism.
• Lenders have experienced an increased volume of calls from clients concerned with debt obligations.
• Freddie Mac’s multifamily COVID-19 program provides three months of forbearance for multifamily borrowers and tenants.
• Other government efforts include further legislation allowing local jurisdictions to implement prohibitions on both evictions and foreclosures.

There is also the Coronavirus Aid, Relief, and Economic Security Act which provides an expansion of unemployment benefits to those who are not normally recipients. For small businesses, there is a loan and grant program to help maintain payrolls during this difficult time. 

3. Updates to Investments 

Did you know they’re actually long-term benefits for multifamily real estate investors? According to Globe Street, a team of real estate experts monitoring the market closely, there are many positives despite the future unknowns. Here is what they found in a recent study:

• Multifamily real estate is maintaining its reputation to be a solid investment for pension funds and REITs.
• Tenant turnover is predicted to decrease significantly, reducing the operating and capital costs of securing new tenants.
• Young professionals might gravitate to apartment style living due to a rise in telecommuting.
• Vacancy rates should remain relatively low with the decline in the construction of new units.

In addition to the data above, George Maravilla, the Senior Vice President of Tower Capital, shares that he is seeing lender participation is up from the recent shutdown. He notes that although it is slow, progress is being made and extensions are being approved.

4. Increase in Technology for Construction and Home Building Firms

COVID-19 has forced many home building and developer companies to prioritize technology spending more heavily than ever before. Much of the market is experiencing a shift from selling homes in person to now selling homes online.Here are more technology changes from COVID-19: 

• Increased consumer demand for virtual tours and showings so homebuyers can continue on their search for the perfect place in a safe manner.
• Consumers are now paying online with a 12% increase in electronic payment volume in April 2020 compared to February 2020.
• Even construction has adapted to this disruption. For instance, mechanical and plumbing contractor UMC Inc. has applied its design and installation to have touch-free wash stations for construction sites.
• While AI is already being used on job sites, there is talk about adding social distancing monitoring to its feature set.

Pepper Contracting Services Inc is one of the many companies already taking advantage of AI’s features. For example, since they are already using AI to identify workers, they are using it to monitor groups as well. The AI company, Smartvid.io, dropped everything to fulfill this request. They added a new tag in their system to detect crowding as a social distancing software. 

If I was an owner of a construction company, I too would consider incorporating these technological features into my business to protect my workers. As a home builder or developer, consider the costs and benefits for what advanced technology means for your business.

These four impacts for multifamily housing are only the tip of the COVID-19 impact iceberg. Expect to recognize even more impacts and shifts within the market as time passes. Do you have any questions about the multifamily sector being impacted by the pandemic? Ask your questions below in my comments.

For more COVID-19 related resources for home builders and developers, read the following:

• How to Sell Homes Online: 6 Strategies During COVID-19 [Part 1]
• How to Sell Homes Online: 11 Strategies During COVID-19 [Part 2]
• 10 FAQs About Home Builder & Developer Strategies Under COVID-19
• COVID-19 from TBBA: 10 Impacts on the Housing Market