The Shrinking Household Size in America, and How to Capitalize on this Trend

We are living through a serious demographic shift that is currently reshaping American life. It boils down to a simple fact: The average household size keeps shrinking, and it shows no signs of slowing down. This is fundamentally reshaping the housing market, and provides an opportunity for those who can capitalize on this trend.

Demographic data shows that the number of one or two person households keeps rising, as many are choosing to live alone, or choosing not to have children. For example, Missoula Montana is one of the fastest-growing counties in America. It is currently going through a spike in job creation and population growth. But that does not mean our household size is rising. In fact, the opposite is occurring. A shocking 70% of Missoula County Households that rent are one or two-person households. In 2019, Missoula had just 1.09 housing units per household. That means that in order for Missoula County to reach the national average, it would have to build an additional 2,400 units. With this pent-up demand, average rents rose 8.6% in the last 12 months. There is a large demand for single family houses, as few are being developed. And Missoula’s statistics are comparable to most large cities in America.

So the majority of these households don’t need a lot of space. But many renters despise having to share walls with neighbors, who can be loud, cook smelly food, and disruptive. As such, there is a premium on single family houses and townhouses that do not share walls with any neighbors. But these single family houses and townhouses are shockingly expensive. For example, in Missoula a median single family house is selling for $540K, which is well out of the price range of many potential buyers. There is an unmet need for workforce housing, as builders cannot build cheaply enough to rent at affordable rates. Tiny Homes, which are structures less than 400 sq. ft., can fulfill this unmet market need.

These tiny homes are ideal homes for two main groups. One, the largest generation in America, Millennials, who are entering their peak home-buying age. This generation is especially interested in tiny living, connecting with nature, and the mobility offered by tiny living. The other ideal demographic are Baby Boomers who are ready to downsize. Many of these baby boomers are divorced or widowed, and simply don’t want or need a three bedroom house anymore.

So what should investors do in this situation? Focusing in investing in smaller spaces is the obvious choice, as people in smaller households need less space. This is especially true as people become more comfortable with storing their excess stuff in self-storage. This can be especially attractive if the self-storage is very close nearby. For example, someone could live in a Tiny House in an RV Community, and have a 200 square foot storage shed in their driveway, where they could store their bikes, ski gear, etc. This allows them to keep their stuff nearby, but not have to heat or cool that space, which can have considerable monthly savings. Or, the RV Park could offer self-storage on-site, which means they can easily access their stuff at any time.

Overall, this is why the Upslope Group is focused on building RV Parks. This is essentially the only place where Tiny Houses can be legally parked. This solution is a win-win-win solution for our investors, our communities, and our residents. Our lots can be occupied by Tiny Homes, Park Models, or RVs, giving our buyers a variety of options. Better yet, we can choose to sell or rent the lots, to match the current demand in the market.

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