Multifamily dwellings provide housing for millions of people. Currently, an estimated 36.8 million people are living in apartments, and approximately 266,000 new units need to be built each year just to keep up.* With this level of demand, it’s increasingly important for investors, developers, and vendors that want to work with the commercial real estate industry to understand the multifamily landscape.
This guide looks at common types of multifamily dwellings and explains what distinguishes them from one another.
First, let’s define multi-family home: MFH (as opposed to SFH — single family home) refers to a structure that is intended to house two or more households separately. A family can refer to a single occupant, a couple, or a family.
Apartments
Apartments are one of the most common types of multifamily dwellings, with 21.3 million apartments on the market as of August 2022.* Apartment buildings are typically owned by a single organization, like a real estate investment trust (REIT) or a property management company. Individual apartment units are rented out, not sold. Apartments often have some common areas and amenities, like a swimming pool, gym, or play area. Maintenance, property decisions, and management responsibilities fall onto the property owner, not the renter.
Duplex
A duplex, AKA double-family home, is a type of multifamily dwelling that consists of two separate living units within a single building. The two units in a duplex typically mirror each other in terms of layout and size, with shared walls between them. Each unit in a duplex has its own entrance, typically located on opposite sides of the building to provide each unit’s occupants privacy. Duplexes can be owned or rented, with maintenance and upkeep falling onto the property owner.
Townhouse
A townhouse is a type of multifamily dwelling that is characterized by a multi-level design and units that share walls on one or two sides. Townhouses are often arranged in a row or cluster to create a community-style appearance. Each townhome has its own entrance and may have a small private patio along with shared common areas and a pool. Townhouses may be rented or bought with common spaces maintained through a homeowners' association (HOA).
Condominiums
Condominiums, AKA “condos,” refer to a community of units that are individually owned. “Condo” refers to the ownership structure, not so much to the building type. Condos can be detached units (like villas), or they can have two or more units in a single building. No matter the structure type, each unit in a condominium building is owned by an individual who holds the deed to the property. Condo owners pay fees to maintain and share the use of common areas and amenities that include swimming pools, gym/fitness centers, parking structures, landscaping, and outdoor spaces. Condo owners own the interior of their homes but may have shared ownership of shared walls and common areas. Maintenance for shared areas tends to fall under the HOA.
Age-Restricted Housing
Age-restricted housing is designed for individuals of a certain age group, typically 55 years and older. These communities often provide amenities and services geared toward older adults, such as recreational facilities and social activities. Various types of dwellings can be featured in an age-restricted community, such as apartments or condos. An HOA or similar organization usually maintains the shared areas and is supported by monthly dues.
Mixed-Use Properties
Mixed-use properties combine residential and commercial spaces. These properties often feature apartments or condos on the upper floors and commercial spaces, such as retail stores or offices, on the ground floor. Mixed-use properties create communities by pairing living spaces alongside carefully crafted commercial spaces. While mixed-use properties are often owned by a real estate investment trust (REIT) or a property management company, the residential units within them may be bought or rented. This type of dwelling is common in high-density urban settings.
Student Housing
Student housing is specifically designed to accommodate college or university students. These properties can vary from large apartment complexes to smaller buildings near educational institutions. Student housing often offers amenities and features tailored to the needs of students, such as study areas and communal spaces. The units may be leased to individual students or to a group of students sharing a single unit. Maintenance, property decisions, and management responsibilities fall onto the property owner, not the renters.
Low-Income Multifamily Developments
Low-income multifamily developments provide housing options for individuals and families with limited financial resources. These properties are typically subsidized by government programs or non-profit organizations to ensure affordability. Low-income multifamily developments can take several forms including apartments or townhouses. Rental rates are usually set at a percentage of the tenant's income. Low-income housing may be bought or rented. Maintenance generally falls to the property owner.
Mixed-used and multifamily properties cater to a variety of housing needs and demographics. From luxurious apartments and student housing to walkable districts that combine living, retail, and entertainment spaces, these types of developments are poised to see high demand in coming years.* Understanding the space will be crucial for investors, developers, and service providers hoping to navigate the CRE market effectively.
Sources
1 Multifamily Dive. “To meet demand, US needs 4.3M more apartments by 2035.” 2022 August 2. Accessed 2023 May 26.
2 NPR. “There’s a massive housing shortage across the U.S. Here’s how bad it is where you live.” 2022 July 14. Accessed 2023 May 26.