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Sep 10
2009

Imaginary Roommates Don't Pay Rent

Posted by: Michael Cunningham

Michael Cunningham


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A quick Google search for the terms "apartment" and "doubling up" gets you about 20,000 hits. Quite a few of those results are articles that feature photos of amazingly wholesome-looking twentysomethings who have combined households to reduce their individual rent payments during today's recessionary times. (Those in the heavily-pierced and totally-tatted set apparently go the lone wolf route, regardless of finances.)


Each story also will feature a quote from a local apartment manager who will state how common the doubling-up trend has become of late.


What you won't see in the article are any reliable numbers that back up the supposedly widespread pattern of behavior. And that absence seems to reflect that such moves in actuality don't occur frequently enough to produce a noticeable impact on apartment market stats.


Sure, it's going to be tough for standard data collection efforts to detect the jobless cousin crashing on your couch, but it should be fairly easy to track the renters featured in the typical story. If a pair of people previously rented separate one-bedroom apartments and now are roommates in a two-bedroom unit, those moves would translate to falling occupancy in one-bedroom apartments and rising occupancy in two-bedroom floor plans (or at least a smaller occupancy drop in the two-bedroom options).


Across the 5.1 million apartment units that MPF Research surveyed nationally during 2009's 2nd quarter, however, occupancy was identical for one-bedroom floor plans and two-bedroom apartments. The occupancy performance was a scant 0.1 percentage point higher for three-bedroom units. Furthermore, occupancy in each of these floor plan options came down by roughly 2 percentage points over the course of the past year, with variation in the shifts from one unit type to another proving too small to be statistically meaningful.


Among the 64 markets that form the core of MPF Research's survey sample, there actually are two spots where occupancy since the recession kicked in at the end of 2007 consistently has been higher in two-bedroom apartments than in one-bedroom units. Those two locales are Orlando and Tulsa. And the reason for that would be ... uhhh ... uhhh ...well, really we don't have an explanation for that, but feel free to share your ideas.


So from MPF Research's perspective, the assumption that apartment renters double up in large numbers during a recession looks pretty bogus. But we'll be polite enough to remain quiet at the next industry conference where somebody says he expects a sizable lift in demand from the undoubling of roommate households once the economy starts to improve.


Market Dynamics is an examination of key influences on the apartment industry by MPF Research, the industry's most trusted source of apartment market intelligence. To receive the latest Market Dynamics newsletter in your e-mail inbox, please click here to subscribe.

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1681
written by Sara Morrill, September 10, 2009
I find this piece really interesting, because of course I've heard about the doubling-up phenomenon and it seemed to make plenty of sense. It's odd that the numbers don't match the perception. Is it possible that this is happening primarily in rental homes, as opposed to multifamily apartments? What's the research look like there?
864
written by Matt DiChiara, September 10, 2009
Mike, great post. this is indeed a very interesting, yet opaque phenomenon.

I am going to dive into some of our internal numbers and take a look from a national perspective as well as look at some key cities.

What city most interests you? (Sara, same question.)

I hope to have a blog up in a few hours with some good info.

349
written by Michael Cunningham, September 10, 2009
Sara,

Roomie households certainly can end up in shadow market rentals, including individually-owned single-family homes or condos offered for lease. It would be incredibly difficult to quantify what's happening out in that segment of the housing pool. There's a good reason it gets called the shadow market.
1681
written by Sara Morrill, September 10, 2009
@Matt: Well, I'm in San Diego, CA, so if you wanted to poke at the numbers there that would work. I was mostly just curious because I know several people who are finding themselves in situations where they're doubling-up - we did it ourselves at our last place, and the place before that - so it seemed like the numbers should bear out the perception.

(Because of course, my perception is what counts smilies/wink.gif)

@Michael: True - although are sole proprietors who own one or two properties still considered part of the "shadow market"? I thought that term was mostly reserved for homeowners who were renting out their homes to stave off foreclosure, as opposed to folks who get into the rental industry intentionally.
349
written by Michael Cunningham, September 10, 2009
@Sara: Census info shows that apartments (rental buildings with five or more units) are only 45% of the nation's total stock, with the remainder divided up among for-lease single-family homes, duplexes, mobile homes and whatever else you can think of that you could rent for somebody to live in. Thus, there are plenty of places for doubled-up households to go that wouldn't register in the results of what's happening in professionally-managed, mostly institutional-grade apartment properties. But again, the sample examined tops 5.1 million units. That's clearly adequate for a pattern that is supposed to be incredibly widespread to register in the data.
1681
written by Sara Morrill, September 10, 2009
@Michael: I see - thanks for the clarification.
1973
written by Blake Ratcliff, September 11, 2009
I am not surprised that doubling up is not a large factor in the apartment industry. Nevertheless, doubling up is a factor in housing in general. In general most doubling up is being driven by the foreclosure market and loss of jobs. In these cases, for most of the doubling up trends heavily into single family homeowners. Thus little change is apparent in our industry.

However, the very dynamics that are making it a factor in this way, make it an opportunity as the market begins to strengthen. Smart apartment owners who create innovative solutions may be able to get more bang from there units, by offering cash saving doubling up opportunities. And with the lid on construction because of changes in the financing community, the opportunity for increased margins and the likelihood of sustained demand could be strong.

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