The Family Premium: America’s Missing Bedrooms
Young families are willing to pay a premium for apartments with more bedrooms, yet a significant share of developers are overlooking this profitable market in favor of smaller, one-bedroom homes, according to new research.
In “Homes for Young Families Part 2: Americans Are Willing to Pay for Family-Friendly Apartments,” Lyman Stone and Bobby Fijan of the Institute for Family Studies examine the disconnect between what is being built and what American families want – and need.
Their findings: While over a third of new housing construction now consists of large apartment buildings, these new units are getting smaller – and have fewer bedrooms than ever before.
Key Takeaways:
- Americans who want children are willing to pay significantly more for apartments with more bedrooms, valuing the difference between two and four bedrooms as much as an extra 600-900 square feet or $1,500 in monthly rent.
- The market is failing to meet demand, as family-friendly units with three or more bedrooms have “available to be rented” vacancy rates 40-50% lower than studios, indicating they are in high demand and rent faster.
- The lack of family-friendly apartments may be suppressing birth rates, as married women in apartments with two or three bedrooms have more children than married women in smaller units.
The team collected 6,288 responses from adults aged 18-54 via Alchemer, weighting the data to match U.S. demographics from the Current Population Survey. The study employed “conjoint analysis,” a method that forces participants to choose between randomized apartment pairs with differing rents and bedroom counts to identify specific trade-off priorities. The researchers further validated their findings with the federal Census and American Community Survey records on construction, vacancy, and fertility.
This approach revealed three crucial findings about the housing market.
- Valuing bedrooms above all else: In a direct comparison of a 1,200-square-foot apartment, 60% of people who want more kids chose the three-bedroom layout over the two-bedroom version. Also, the study’s trade-off model shows the perceived value difference between a two-bedroom and a four-bedroom unit is as significant to buyers as a 600-900 square-foot size difference or a $1,500 rent hike, making bedrooms the single most crucial feature.
- A market failure: While 8% of studio apartments are vacant and available for rent, that rate drops to just 4-5% for three and four-bedroom units. Developers often assume vacancy rates are stable across unit types, but this is an error; smaller units have higher turnover and higher-risk tenants, making them more expensive to operate than builders realize.
- A link to birth rates: Among respondents who want more children, 25% of those in apartments report that housing costs have influenced their fertility decisions. Moreover, Married women in 3-bedroom apartments have birth rates nearly double those of women in 1-bedroom units (4.5 children vs. 2.5).
The research supports specific policy changes to fix this market failure. To stop discouraging multi-bedroom units, cities should set parking requirements per unit rather than per bedroom. Public housing trusts should be mandated to prioritize producing the largest possible number of bedrooms, not just units. Finally, accelerating permitting for smaller projects can encourage more experimentation in building configurations.
As long as apartments dominate new construction, aligning building codes and developer incentives with what families actually want is a clear path toward meeting market demand. This shift could make it easier for more Americans to have the children they desire.