Europe has shown some drastic differential ratios of homeownership versus renting, with some countries at near 80% ownership rates, while others are at a much lower rate of 50%. This data exemplifies strong cultural and regulatory variable mindsets in the rental market and its extension along the population’s ages. Meanwhile, what’s evident in every geography in the world is the growing size of people who rent and who are extending their permanence in the rental market or postponing their decision to buy. Homeownership doesn’t exclude the desire to re-enter the rental market later on in life, as is evident in the senior living market. There are more forces moving in the same direction that bring people access to the rental market and extend their permanence in it: the housing affordability crisis and house price appreciation compounds aren't going to be solved, while low saving rates of the current generation will make it harder and harder to gain access to buying options. The explosion of rent rates in urban areas will continue to drain resources of a large proportion of the population and support the consolidation of alternative living solutions like co-living. The changing needs of today’s renters and investors offer different age groups in residential accommodation the option to be grouped under a particular Living Label. A Living Label is described by major player JLL as “to group under the same roof; student housing, coliving, multifamily and senior/retirement housing.” Generation Z will be the first one to have the possibility to live the entire lifecycle under branded accommodation, starting from student housing, moving on to co-living, and so on. In my opinion, the co-living operator is the precursor to the transformation of the residential market. While many are targeting the same specific demographic or customer needs with slight differentiation in terms of positioning, smarter ones are coming out with new offerings that cater to different types of consumers like couples, families with kids, and upper-middle-class residents. Large growth in BTR developments are a sign that investments are moving towards new features and living styles of future generations. My feeling is that the real estate incumbents are not providing a structured offer for couples and/or small families, leaving them to the independent rental market or unlabeled multifamily offerings. The Kin project launched by Common is still an experiment (a co-living solution for couples with kids, integrating childcare services in apartment buildings) and it seems that there’s some fear to “touch” this market. However, living together with a small family is a natural step in many people lifecycle and more brands need to cover this long-standing tradition. As a result of this, new players and offers are starting to clash more directly with the traditional multifamily products, typically targeting families. This phenomenon is just getting started. Notwithstanding a declining marriage rate, the divorce rate has reached a stunning percentage of more than 50%. Moving people back to single living is another example of a submarket waiting to be addressed and served. People will move back and forth from single to paired status within their lifetimes and more fluid alternatives need to be developed. The loneliness epidemic is an issue that has been addressed by living players and fostering community development is one of its biggest retention tools. The perception and the advantage of being part of an enlarged family or microcosm will maintain people under the same rental situation for longer. The evolution of standardized branded solutions in the multi-family sector will need to be provided by large real estate operators assuming a role similar to that played by Marriott or Hilton in the hospitality sector. Seeing a future where different living sectors can grow in scale and influence means that more brands will be launched by the same player focused on different types of people, this will be the capacity by which renters will be able to rent along their entire lifecycle under different brands, operated by the same real estate investor. Taking advantage of this factor is what will determine who will be the winner. The living sectors could be operated as isolated silos: an operator could collect data, preferences, and evolve a relationship with the renters living in its building and use this knowledge to retain the same people under its offer at different stages of their lives, improving their customer experience. A dedicated customer service relationship department will need to advise and retain the client, while the operator needs to develop brand loyalty with initiatives such as rewards programs. While the renter condition is due to a growing desire for flexibility, full serviced solutions, added amenities and the unaffordability of housing, some solutions need to be developed to ease the biggest pain points compared to homeownership: the perception of rent as wasted money and the inability to participate to the capital appreciation trends of real estate. PropTech start-ups are trying to develop fractional ownership solutions or some financial and legal structures to let them become stakeholders in some ways. Maybe offering the possibility of investment in residential Reits or the opportunity to own a piece of the portfolio operated by the real estate manager could appease the desire of ownership and retain people in the rental market for their entire life without excessively losing financial benefits. What is evident is that in the next 5 to 10 years, the lines between hospitality and residential will continue to blur. Living the entire life renting will become a normal option for a larger share of population: renting will turn into membership and the residential market will operate similarly to how actual “alternative” players are doing it now with an added layer of having the possibility to move within the living pattern under the same brand.
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