Popular notion holds that Baby Boomers downsizing their homes are a major force behind the recent apartment boom. One recent article noted that the “magnitude of Boomers’ rental demand [has stunned] some industry observers,” while another asserted that “boomers are renting apartments and buying condos at more than twice the rate of their millennial children.”1
The problem with these accounts is that they aren’t supported by the data.
One likely cause of the misconception that Boomers are driving apartment demand is confusion between changes in demand by generation (i.e., a group of persons born during the same period) and by age group. To disentangle these two distinctive ways of looking at demand trends, we built a dynamic data visualization tool that illustrates the net change in apartment2 consumption between 2009 and 2014 (the latest data available) both by generation and by age.3
Source: U.S. Census Bureau, 2009 and 2014 American Community Survey Public Use Microdata Samples, 1-Year Estimates.
Here’s how it works. The left panel of the tool focuses on the generations, who are distinguished from each other by different colors.4 The right panel of the tool shows apartment consumption for different age groups. The top charts show the total number of apartment units occupied in either 2009 (when the 2009 button is selected) or in 2014 (when the 2014 button is chosen). When the 2014 button is selected, the bottom charts reveal the net change in the number of apartments occupied between 2009 and 2014 by generation (left side) or by age group (right side).
Baby Boomers occupied millions of apartments in 2009, as can be seen from the orange-shaded bars in the upper-left chart. However, as Boomers have aged, their demand for apartments hasn’t grown very rapidly. When toggling to the 2014 button, we see from the chart at bottom-left only a modest increase in Boomer apartment occupancy between 2009 and 2014.
By far, the most important generational driver of apartment demand growth between 2009 and 2014 was the Millennials. Millennials have been reaching adulthood and entering the housing market in large numbers in recent years. For many of these new housing market entrants, the first step in their housing careers after leaving the parental nest has been occupancy of an apartment. As can be seen from the chart at bottom-left when the 2014 button is selected, Millennials’ demand for apartments increased by millions between 2009 and 2014, far outpacing the demand growth from Boomers. In fact, the increase in Millennials’ consumption of apartments during this period was more than 10 times that of Boomers, as can be seen when the “All cohorts” button is selected.
So why the perception that Boomer apartment demand is booming? One possible answer lies in the chart at the bottom-right. With the 2014 button selected, we see that the number of apartment dwellers in the 49-68 age range, which Boomers occupied in 2014, grew substantially between 2009 and 2014. As successively larger waves of Boomers have advanced into this age group and replaced the much smaller generations who preceded them, the ranks of late-middle-aged and early-elderly apartment renters have swelled. It is likely that some analysts see this substantial increase in the number of mature renters and erroneously conclude that large numbers of Baby Boomers are changing their housing behavior; that is, Boomers must be downsizing in droves, moving from owner-occupied single-family homes into apartments. But as the generational charts show, Boomers aren’t consuming many more apartments. Rather, for the most part, they’re simply aging in place, with those who previously occupied apartments in 2009 carrying that status with them into older age categories in 2014.
Another reason for the misperception of surging Boomer apartment demand might be that commentators are focused on the largest buildings, which have seen more rapid gains in Boomer demand in recent years. Whereas the number of Boomer occupants in apartment buildings with 50 or more units increased by 16 percent between 2009 and 2014, Boomer occupancy in apartment buildings of all sizes grew by just 5 percent during the same period. But even within the large-building market segment, where Boomer apartment demand is increasing most rapidly, Millennials are still the dominant driver of growth: The increase in Millennials’ consumption of rentals in 50+ unit buildings during the last five years was more than three times as great as that of Boomers.
As Baby Boomers continue to age into the latter stages of their housing market journeys, their consumption patterns will undoubtedly change, possibly leading to substantially more apartment demand from this market-moving cohort. However, the available evidence suggests that we’re not yet seeing a major shift of Boomers moving out of their single-family homes and into apartments, and that the true generational driver of mushrooming apartment demand in recent years has been the millions of Millennials who are just beginning their housing careers.
Director, Strategic Planning
Economic & Strategic Research
March 10, 2016
1 See KC Sanjay, "Empty-Nesters Flock to Apartment Living", Multifamily Executive, November 19, 2014, and Ylan Q. Mui, "Millennials' Top Competition for Condos Might Be Their Parents", Washington Post, October 17, 2015.
2 We define apartments as renter-occupied housing units in buildings with 5 or more units.
3 Data between 2009 and 2014 are linearly interpolated for presentation purposes only and do not represent actual apartment occupancy data for the interim years. Gray outlines represent occupied apartments in 2009.
4 The generations here are defined as: Millennials (born 1981-2000), GenX (born 1966-1980), Baby Boomers (born 1946-1965), Older (born before 1946).
The author thanks Philip Bogden for developing the dynamic data visualization tool used in this article. He also thanks Katie Penote, Orawin Velz, Chester Martin, and Mark Palim for valuable comments on an earlier draft of this commentary. Of course, all errors and omissions remain the responsibility of the author.
Opinions, analyses, estimates, forecasts and other views of Fannie Mae's Economic & Strategic Research (ESR) Group included in these materials should not be construed as indicating Fannie Mae's business prospects or expected results, are based on a number of assumptions, and are subject to change without notice. How this information affects Fannie Mae will depend on many factors. Although the ESR Group bases its opinions, analyses, estimates, forecasts and other views on information it considers reliable, it does not guarantee that the information provided in these materials is accurate, current or suitable for any particular purpose. Changes in the assumptions or the information underlying these views could produce materially different results. The analyses, opinions, estimates, forecasts and other views published by the ESR Group represent the views of that group as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.