Apartment construction will require large investment to meet demand

According to David Brickman, the senior vice president of the multifamily division at government-sponsored enterprise Freddie Mac, projections indicate the asset class will need $1 trillion in capital in the coming decade.

Multifamily construction has been relatively high lately, but is still lower than needed to meet anticipated growth of demand. The median age for existing apartment buildings is 40 years, which may also invite construction to replace existing units with more modern alternatives.

"In fact, the decline in the homeownership rate has been sharpest for those household heads under 30 years of age," Brickman recently wrote in a Freddie Mac blog post. "For every 1 percent that the current homeownership level of 66 percent decreases, 1 million individuals become renters."

In the twelve months beginning mid-2010, approximately 1.4 million families moved into rentals. The projected $100 billion per year would support the construction of 10 million additional apartment units in that timeframe, providing housing for tenants who choose to rent and others who are forced to by their financial circumstances.

Brickman noted housing construction and increased rentership can contribute to local job creation and support communities as new renters spend at area businesses.