As the first members of Generation Z turn from college students to renters, the multifamily housing industry needs to be ready to face a new set of demands. The amenities war continues to wage on, but that might not be enough to woo the incoming wave of residents. Sustainability, instead, could be the answer.
The distinction between millennials and Gen Z is a tricky one, with cultural similarities converging on each generation’s borders. Interests between these generations overlap, and considerations made for Gen Z can also be attractive to the tail end of millennials. According to the Pew Research Center, Gen Z consists of people born past 1997, meaning the oldest are turning 23 this year. This compares to the millennial generation, the current darling of multifamily, born between 1981 and 1996.
From all demographic angles, including political affiliation, Gen Z (and younger millennials) are the generation most concerned with sustainability. In a February 2020 survey from the Pew Research Center, when asked what issues should be the top priority for President Trump and Congress, 77% of 18- to 29-year-olds said the environment. Not only was this the top concern for this age group, but it garnered the most support for any policy area across all age groups.
“Sustainability is the new amenities race,” observes Noel Carson, director of marketing and brand design for The Bozzuto Group. Carson recently worked on Bozzuto’s Trellis House, a LEED Platinum-certified building in Washington, D.C., designed to focus on sustainability. The name itself means growth and was chosen to evoke feelings of lushness and greenery. Among the many sustainable amenities is its marquee “rose room,” a temperature-controlled space that residents can rent to grow herbs and plants for their homes.
Sustainable amenities are extremely popular among Gen Z and have boundless potential. In the 2020 National Multifamily Housing Council (NMHC)/Kingsley Apartment Resident Preferences Survey, renters younger than 25 indicated strong interest in sustainable amenities like on-site renewable energy, composting, recycling, high-efficiency and Energy Star appliances, and other environmental initiatives. And they were not the only group to feel this way, with those aged 25 to 34 and 35 to 44 expressing similar interest, reiterating the overlap between Gen Z and millennials.
Even more significant is Gen Z’s willingness to back up their interest by paying more for sustainable products and amenities. For example, despite their generally lower incomes, residents younger than 25 indicated expected premiums for sustainable amenities at near equal rates to what older residents stated in the NMHC/Kingsley Apartment Resident Preferences Survey.
In terms of new development, many eco-friendly factors are already baked into the designs, according to Jorgen Punda, senior vice president, investments at Gables Residential. More and more, jurisdictions are requiring or incentivizing efficiency and sustainability standards. Developers often have no choice but to prioritize sustainability from day one.
As Punda explains, certifications like LEED are instrumental in achieving these standards. “Certifications provide an itemized list of how to achieve your sustainability goals; it really boils it down to the basics,” says Punda. “With certification, you would likely accomplish many of the same goals you already set for your project, but having an established road map helps put the full suite of design professionals and contractors on the same page ensuring we meet the needed standards to achieve our sustainability goals.”
From a competitive standpoint, the decision to certify is an easy one. Most new multifamily developments are aiming for certifications. “It’s becoming a desirable standard for developers and a preference for the educated consumer on green standards,” explains Punda.
There are also upsides to having third-party verification. According to Punda, “One of the benefits of having the third-party review is to verify that what is built in the field matches the performance expectations and design intent of the plans.”
Aside from more visible sustainable amenities like vegetable gardens, there are many other energy-efficient features that residents don’t always realize are improving their lives and saving them money. Features like high-efficiency toilets and LED lighting, for example, save the resident (and the owner) utility costs among other intangible benefits.
“For one, if their home is airtight, it’s not only more energy efficient, it’s extremely quiet,” explains Juliette Apicella, director of sustainability for Gables Residential.
Daylighting is another example of an amenity with multiple benefits. “Larger windows showcase more natural light,” says Apicella. “Daylighting has been proven to make people feel good and foster greater productivity. More light from the outside also means that residents don’t need to turn on as many lights in their homes.”
These features are a great way to appeal to Gen Z, a generation that wants to contribute to the world, but has financial restraints as they start their adult lives. With energy-efficient living spaces, they are not just renting a home built with the environment in mind, but they are saving money thanks to those same sustainable features that appealed to them from the start.
Though 10 or 15 years ago, efficient appliances might have come with a larger price tag, today costs have mostly evened out to those of conventional alternatives. The benefits are well worth the investment.
“It’s just a better building,” explains Punda, “it’s more efficient, it’s tighter, it’s healthier, and allows for fewer maintenance issues whereby reducing the number of work orders received from residents.”
Health and wellness are also major facets of sustainability, and, for the next wave of renters, may be another tipping point. Inside buildings, these include sustainable amenities like electric car charging stations and community bike storage, as well as design features to encourage healthy and active living, like promoting the use of stairs instead of the elevator. But locational factors, like walkability and proximity to transit, are immensely desirable for most new developments.
“If you look at sales and leasing comps, the numbers are certainly in your favor to be walkable to major public transportation,” adds Punda. “When we start looking at sites, that is one of our top considerations given that it offers a greater long-term value.”
The challenge of development, especially for the next wave of renters, is predicting the future. From conception to opening, a new development takes many years, and projecting consumer desires down the road is incredibly difficult. This has become even more challenging when factoring in the possible long-term effects of COVID-19, observes Punda.
“What we’ve previously designed may drastically change as we wrestle with the implications from COVID-19,” he says. “It may alter the way we orient our apartments and design our amenities—how we create more areas to work from within the home, separate spaces for dedicated home offices in the building, and more private and public outdoor areas like balconies and terraces for example.
As developers are planning and designing communities that appeal to Gen Z renters, sustainability should be a top priority.
“Communities that aren’t falling into Gen Z’s sustainability expectations are going to have a hard time,” says Apicella. “When you look at the education Gen Z is receiving, and what they are learning in school, Gen Z is going to have an expectation of how things are and how they should be relative to sustainability efforts.”
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