In this market update, we will review the following key themes shaping the multifamily market:

• Strengthening multifamily fundamentals creates a framework to push rents higher.
• The housing policies of the Trump Administration may provide a positive impact to multifamily investors although caution is warranted.
• Continued migration to the Southeast to drive future rental growth in high-opportunity metros.
• The rise of sole person households will fuel demand for smaller, more affordable housing.
• The fragmentation of the apartment industry favors nimble, performance-focused operators.

Stronger Apartment Rent Environment Expected

The February 14, 2025, Wall Street Journal article titled “We’re Headed Toward a Landlord-Friendly Era. Expect Higher Rent Prices.” reinforces a central theme we’ve discussed in recent investor letters: the impending shift in market dynamics as new apartment construction slows. After a construction surge in 2023 and 2024 temporarily depressed rents in oversupplied Sunbelt markets, the development pipeline is now contracting sharply. With homeownership remaining out of reach for many due to elevated mortgage rates, rental demand is strengthening, and vacancy rates have dipped below their long-term average for the first time in two years.

This rebalancing of supply and demand sets the stage for renewed rent growth and increased pricing power for landlords heading into late 2025 and beyond. The article supports our outlook: as construction slows and leasing activity rises, multifamily fundamentals are poised to improve. Investors are already positioning for this shift—especially in markets like Atlanta—reinforcing our belief that a new phase in the rental housing cycle is beginning.

New Trump Administration – Possible Federal Policy Impacts on Multifamily Housing

We view the current federal policy environment under a second-term Trump administration as directionally favorable to the multifamily industry. Early actions—such as the rollback of the Affirmatively Furthering Fair Housing (AFFH) rule—signal a continued emphasis on deregulation, reducing federal zoning oversight and potentially easing local political resistance to multifamily development in select markets. While this shift may enhance the regulatory landscape for apartment developers, we do not expect a significant increase in new apartment supply due to persistent structural headwinds, including elevated construction costs, labor shortages, high interest rates, and credit caution. Federal-level immigration and housing eligibility restrictions—such as the exclusion of undocumented residents from FHA-backed loans—may modestly shift demand in certain urban areas, potentially benefiting market-rate, middle-income apartments by narrowing housing alternatives for affected households. Meanwhile, proposed tariffs on construction materials and potential HUD staffing cuts could further constrain new apartment development plans.
There has also been renewed discussion around privatizing government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac. While this introduces an element of uncertainty, most multifamily industry participants do not expect near-term disruption. The administration appears to recognize the essential role these GSEs play in maintaining liquidity and stability in the housing finance system, with Fannie and Freddie currently backing roughly half of the nation’s mortgage debt. For multifamily investors, they remain sources of reliable, long-term, fixed-rate, non-recourse financing.

Finally, the administration’s efforts to reshore manufacturing and expand middle-income employment, if successful, could further support demand for value-add multifamily housing by increasing the population of upwardly mobile renters.

Notwithstanding the above, with many policy details yet to be defined, the ultimate direction of federal housing policy under the Trump administration remains uncertain.

U.S. Migration Patterns Hold Steady – Southeastern U.S. Continues to Attract Population

Recent data from ResiClub highlights a sustained trend of population migration toward Southeastern U.S. metro areas, particularly Orlando, Houston, Tampa, and Atlanta. Orlando experienced a sharp spike in 2022, gaining over 37,000 new residents, with continued growth in 2023. Houston consistently ranks near the top for net migration, adding more than 73,000 people in 2022 alone. Tampa has also seen steady gains of nearly 20,000 annually from 2020 to 2022, while Atlanta, after a dip in 2020, rebounded strongly by adding over 37,000 residents in both 2021 and 2022. These metros have proven especially effective at attracting a younger, college-educated demographic that fuels innovation, job creation, and long-term stability.

Broadly, the trend reflects a pronounced shift away from major urban centers in the Northeast and West Coast—such as New York, Los Angeles, San Francisco, and Chicago—which continue to see annual outflows exceeding 50,000. Southeastern cities offer a compelling combination of affordability, low taxes, business-friendly labor laws, warm weather, and expanding job markets. This migration is not only reshaping population centers but also concentrating future economic growth and apartment demand in these high-opportunity regions.

The Rise of Sole-Person Households to Drive Multifamily Demand

A 2024 study, The Growth of Sole-person Households: Creating Even More Demand for Smaller, More Affordable Homes, projects an additional 5 million sole-person households by 2030, with continued growth expected into the following decades. This rise is fueled by aging Baby Boomers and Gen Xers facing life events like divorce or widowhood, along with Millennials and Gen Z delaying marriage and family formation due to economic constraints, career ambitions, and evolving values emphasizing independence.

An increasing number of women are also choosing long-term singlehood. According to the March 21, 2025, Wall Street Journal article, “American Women Are Giving Up on Marriage,” more women than men are attending college, purchasing homes, and prioritizing careers and friendships over marriage. Today, 51.4% of women aged 18 to 40 are single, with many no longer viewing marriage as essential. This shift, driven by rising female earning power and broader social change, is expected to significantly increase demand for smaller housing units suited to independent lifestyles.

As shown in the graph below, just 17.1% of households in 1970 were single-person households, representing around 34 million Americans. By 2022, that figure had risen to 28.9%—approximately 98 million people living alone—marking a nearly threefold increase in the number of solo dwellers.

Source: U.S. Census Bureau, Current Population Survey, 1970 to 2022 Annual Social and Economic Supplement.

This societal shift reflects the normalization of solo living, longer lifespans, and the role of technology in maintaining social connections. As this trend continues, it will place increasing pressure on a housing market still largely oriented toward families and larger households. With homebuilders focused on larger properties, the shortage of housing tailored for sole-person households is likely to persist, intensifying demand for affordable, multifamily options.

In his recent 2024 book A Paradise of Small Houses, urban planner Max Podemski makes a persuasive case for the rising demand for multifamily properties in America. As the number of sole-person households continues to climb, Podemski highlights how mid-density housing models—including multifamily properties, duplexes, row houses, and bungalow courts—are uniquely positioned to meet this demographic shift. He argues that these housing types once served as affordable, community-oriented solutions and can again play an increasingly vital role in addressing today’s housing shortage. With the growing need for compact, independent living options, the book underscores the increasing relevance—and investment potential—of multifamily properties in a changing U.S. housing landscape.

Fragmented Apartment Industry Offers Opportunities for Strong Operators

The U.S. apartment industry remains highly fragmented, with even the largest operators controlling only a small fraction of the market. Greystar, the largest multifamily manager, holds just 0.47% market share—a sharp contrast to industries like tech or finance, where dominant firms control substantial portions of market share.

At Providence, we view this fragmentation as a competitive advantage. Our moderate scale enables us to remain agile, prioritize resident experience, and tightly manage financial performance. Unlike larger firms focused on expanding footprint, we center our strategy on operational excellence—driving returns through superior property and asset management.

Even the largest U.S. multifamily owners each control around 0.5% of the market, as illustrated in the chart below:

Market Share of Top 50 Apartment Owners Versus All Others

About Providence Real Estate

Since 1985, Providence and its affiliates have actively operated as owner-operators of multifamily residential communities. Its principals have acquired over 65,000 apartment units, worth over $7.5 billion. Providence comprises an experienced team of professionals dedicated to searching for, identifying, acquiring, renovating, and operating multifamily properties in select U.S. markets. As a fully integrated real estate organization, Providence includes divisions for Property, Asset, and Construction Management; Acquisitions; Accounting; Information Technology; Human Resources; and Business Development. To learn more please visit https://www.provre.com.

DISCLAIMER

The information contained in this letter is provided solely for informational and discussion purposes. It is not intended as an offer to sell, nor a solicitation of an offer to buy, any security. This document may not be relied upon in connection with the purchase or sale of any security. Any such offer or solicitation will be made exclusively through a confidential Private Placement Memorandum (PPM), subscription documents, and governing documents. These offering materials must be reviewed thoroughly before making any investment decision, as all information herein is qualified in its entirety by those documents.

This letter also contains forward-looking statements, which are based on current assumptions and expectations and involve risks and uncertainties. Actual results may differ materially, and Providence Real Estate undertakes no obligation to update any such statements.

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