Last modified on August 23rd, 2023
By Brittany Benz
Global events over the past few years simultaneously influenced an economic recession and a booming housing market. These unique market conditions have had major implications for the property management industry. To stay successful and prepare your business for what’s next, you need to understand how and why the property management industry is shifting.
Here are the top five property management trends that are impacting the market today:
1.) A tough labor market makes it hard to attract and retain team members
From working weekends, to being on-call after hours for maintenance emergencies, to weathering customer service highs and lows, being a property manager has always been a demanding job that sees higher-than-average turnover rates.
However, with new demands for higher wages to combat record inflation, better work-life balance for flexibility, and wider opportunities for career growth, property management companies are experiencing new levels of staffing complexities. In fact, for the last two years in a row, staffing has consistently been ranked as one of the most pressing issues for property management.
To attract and retain top talent in today’s tight labor market, property management employers need to rethink what they can offer teams and how to make work more meaningful. While this does include offering more competitive wages and benefits, employers should also look at these key factors as found in the AppFolio Hiring and Retention Report:
- Streamline tasks and smooth workflows: The easier it is for team members to complete their tasks, the more satisfied they will be. Reduce friction by making sure teams have tools to streamline their efforts and automate tedious, time-consuming, and repetitive tasks.
- Invest in company culture: Cultivate a supportive company culture and offer flexibility in employees’ working hours to help them feel more supported and valued, which can minimize turnover.
2.) Stubbornly high inflation rates impact the cost of doing business
Although inflation rates have decreased significantly from their June 2022 peak, they’ve stayed high enough to continue to significantly impact every cost of doing business. In addition, inflation rates for some of property management’s most significant hard costs — such as energy expenses — are actually higher than the overall inflation index.
While cutting budgets and freeing up cash flow may seem like the best step to counteract increasing costs, doing so can actually hinder growth and won’t be sustainable in the long run. Instead, property management companies need to master operational efficiency.
The good news is operational efficiency doesn’t just benefit your budget’s bottom line: Property management employees want to remove inefficiency from their day-to-day workload, too. In fact, recent survey results show team members spend 14+ hours of their week on tasks they feel could be streamlined or automated, and 56% wished they had more time to address higher-value tasks.
You can make operations more efficient by leveraging AI to automate workflows and processes. This way team members can do more with less and focus more of their time on business-critical initiatives.
3.) High home costs continue to prevent renters from becoming homeowners
As of 2023, older Gen Z members have officially reached home-buying age, but that doesn’t mean they are in a position to buy a home. For all would-be homeowners, high home costs, stubbornly high inflation, and mounting debts continue to push home buying out of reach, considering the median selling price for a home in March 2023 was $400,698 while the average personal income is around $63,000 per year.
For context on just how wide the affordability gap is in the U.S. today, BankRate.com’s housing affordability calculator estimates someone making $63,000 per year could afford a home up to $204,000. The calculation also assumes the potential buyer has zero debt, takes out a 30-year fixed home loan at the current rate of 6% interest, and provides a down payment of $20,000.
This all leads to an inevitable result: Gen Z, Millennials, and younger individuals will continue to rent long after reaching the age at which previous generations purchased homes.
4.) Single-family home rentals are on the rise
Because homeownership continues to remain out of reach for so many, renters have increasingly turned to single-family rentals. In fact, single-family rentals have grown in popularity and price at much higher rates than market-rate units, with median asking rent for a three-bedroom single-family rental increasing 7.4% since December 2022.
In addition to traditional single-family rentals, build-to-rent communities have also quickly gained traction. These communities allow residents to experience the lifestyle that a single-family home offers — more space than most apartments, fewer restrictions than apartment living, improved privacy, and possibly a small yard — without the large down payment or long-term financial commitment of buying.
Even with increased construction costs and higher interest rates, build-to-rent community development has continued to flourish with no signs of slowing down. This year alone, industry experts predict build-to-rent developers will create more than 132,000 homes, an inventory up almost 11% from 2022. By 2025, development is expected to jump to 167,000 units.
5.) Competition is increasing as multifamily construction reaches a 50-year high
In response to soaring demand for rental housing amid rental shortages over the last few years, multifamily developers have responded by increasing construction to a 50-year high. Approximately 420,000 new rental units are projected to come online by the end of 2023, surpassing the last construction peak seen in 1972.
While this news is great for residents, it also increases the number of options and choices they have, which in turn can also drive up competition. To stay competitive against brand-new units and modern built-in amenities, existing properties will need to find ways to differentiate themselves in order to continue to attract and retain residents at the same rates.
One way to do so is to focus on the resident experience, which means providing what residents want and understanding their shifting needs. Here’s a snapshot of renters’ expectations today:
- Build trust with prospects: 30% of Gen Zers said that the first thing they do before booking an apartment tour is to check its ratings and reviews.
- Make doing business easier: According to NMCH/Grace Hill research, more than 50% of renters prefer to fill out their renewal contract exclusively online.
- Be more responsive and present: Around 30% of renters say “responsiveness, flexibility, and technology” are now deemed more important than ever.
Keep your property management company competitive in 2023 and beyond
Here are some actionable steps you can take to directly address the five trends we’ve discussed:
1.) Attract and retain professional talent by offering competitive wages, benefits, flexibility, and a supportive company culture.
2.) Find ways to solve for inefficiencies across your business and leverage new AI technologies in order to maximize output without cutting budgets or impacting growth.
3.) Recognize that today’s renters are skewing older as homeownership becomes less affordable. Rentals aren’t just for those in their 20s anymore, so you may need to shift your marketing and messaging to reach more mature prospects.
4.) Consider investing in single-family rentals and build-to-rent single-family homes that are in high demand.
5.) Stay competitive by understanding how residents’ needs have shifted and meeting their new expectations.
By embracing these emerging trends now, pivoting your business strategies, and putting the right solutions in place, you’ll be better able to attract great talent, serve your residents, and gain a head start over your competitors. Download our free guide below for ideas on streamlining your multifamily operations.