Apartments

Affordable Apartments? Skip the Amenities

July 24, 2019

New apartment communities must have amenities, right? Not necessarily. Our consumer research shows that the most valued amenity is frequently “low rent.” A recent survey by the NMHC showed that the two top community amenities nationwide are:

  • reliable cell reception (78%)

  • secure resident parking (71%)

Only 60% desired a swimming pool, and 55% wanted a fitness center.

As rental rates continue to rise nationwide, rental affordability has become a big concern and the need for affordable rental options has never been greater. Our Burns Intrinsic Apartment Rent Index, which measures apartment rent valuation based on the long-term median ratio of rents to incomes, suggests that about half of the major markets in the country are overvalued by more than 5% and many by 10%+. San Francisco East Bay Area rents are 13% higher than they should be, meaning that we think a 13% correction is needed to get back to norm. This likely will not happen until the next recession.

Developers’ focus on building Class A apartments in expensive urban markets over the last decade increased the number of higher-priced apartments. At the same time, rents rising faster than inflation and investors’ thirst for value-add opportunities decreased the overall supply of lower-priced apartments.

One way to provide more affordable rental options is by building smaller apartment communities without amenities or with fewer amenities. Foregoing traditional community amenities (pool, fitness center, etc.) reduces development and operating costs, allowing for more affordable rental rates. Consider the following:

  • Zoning laws and high land prices often make it difficult to build housing that low- and moderate-income people can afford.

  • Many renters don’t want to live in a 400-unit apartment complex because they feel less safe and just like a smaller number. These people prefer small communities and are willing to have less amenities.

  • Land is scarce in infill neighborhoods close to jobs, limiting the feasibility for large, highly-amenitized communities.

Example: 54 Woodstock – Portland, OR

Source: 54 Woodstock

54 Woodstock in Portland is an example of a small apartment community with no amenities. The community is pet friendly and includes bike storage, surface parking, individual utility meters, outdoor mailboxes, and WiFi. The community has a high walk score (73) and is within a few miles of downtown Portland.

We suggest looking for locations where the amenities are nearby and free. Below are a few strategies to keep in mind:

  • Walkability. Locations with easy access to parks, restaurants, shopping, and/or mass transit command high rents. Advertise your proximity to the local fitness center, park/community pool, hiking/bike trails, and dog park. If applicable, promote high walk or bike scores. Market the surrounding neighborhood as the amenity.
 
  • Create community. Allow your tenants to create a “high-touch” community where they can come together to enjoy life. Groups that do things together are wonderful amenities, and they are free. Social connection can be a wonderful amenity.
 
  • Nearby businesses. Build partnerships with the local fitness centers where residents get discounted monthly gym fees, yoga/cycling classes, etc.
 

The rental market has changed, providing developers with great opportunities.

Building Market Intelligence™

Every week, we deliver analysis to over 40,000 subscribers with our Building Market Intelligence™ newsletter. Subscribe to our weekly BMI newsletters to stay current on pressing topics in the housing industry.

About The Author

Contact Us

If you have any questions about our services or if you would like to speak to one of our experts about we can help your business, please contact Client Relations at clientservices@jbrec.com.

Products and Services Mentioned

green check icon

New Home Trends Institute

The New Home Trends Institute pairs design inspiration with exclusive insights into the “why” behind consumers’ housing choices. Gain exclusive insight into housing preferences and pain points through our monthly survey insights reports, webinars, and proprietary surveys of builders, architects, designers, and other industry professionals.
green check icon

Real Estate Consulting

Our experienced team of consultants helps clients make sound housing investment decisions. We thrive on their success and work with many clients over multiple years and numerous projects.
green check icon

Research Membership

Our research services enable our clients to gauge housing market conditions and better align their business and strategic investments in the housing industry. We provide a thoughtful and unique holistic approach of both quantitative and qualitative analysis to help clients make informed housing investment decisions.

Latest Insights

NHTI Industry Pulse: $40K for a Gym Membership?
Dear Consultant: Can people still afford homes with high rates and increased inflation, or are they more likely to rent? 
Hillwood Communities and the Art and Science of Placemaking