Did you know that over 40 million American citizens currently live in apartments, exceeding the entire population of Canada? [1] While multifamily real estate (apartment buildings) has a strong presence globally, they were only introduced to the United States in the first half of the 19th century, driven by the Industrial Revolution and a desire to accommodate increased populations nationwide. It was then that widespread movements of working-class and immigrant families to inner cities resulted in what was referred to as tenement housing.
This article will define key terms in multifamily real estate, including “tenement” and “REIT,” and explore its evolution from early tenement buildings to modern apartment communities while examining trends in urbanization, industrialization, and the overall economy.
URBANIZATION & INDUSTRIALIZATION
Historically, “tenement” referred to any permanent residential rental property (house, land, rights, etc.). Masonry row houses, suburban middle-class houses, and warehouses were often repurposed as tenements. [2] So, single-family structures were converted into multiple apartment units, and eventually, new tenement dwellings were built, bringing forth a new era of multifamily housing. [2]
19th-century tenement buildings were characterized by their size, scale, and affordability. They were typically three to seven stories high, overcrowded, vulnerable to fires, and poorly constructed with cheap materials. You might recognize tenement housing from references in popular culture and film; Ron Howard’s award-winning biographical drama, Cinderella Man, somewhat accurately depicts Depression-era New Jersey tenement housing. Residents often had shared bathrooms and little ventilation or, in extreme yet common cases, no ventilation. Due to these poor living conditions, tenements became a breeding ground for disease. The cholera epidemic of 1849 took more than 4,500 lives, many of whom were impoverished and living in tenements. [2]
EARLY TO MID 20TH CENTURY
The intolerable conditions of tenement housing diminished as safety standards were introduced. Reform legislation began in New York City, where over 80,000 tenements had been built by the turn of the century. [2] Writer and historian at the New York Public Library, Assistant Director Carmen Nigro, explains that a tenement is legally defined by the Tenement House Act of 1867 as “‘any house, building, or portion thereof, which is rented, leased, let or hired out to be occupied or is occupied, as the home or residence of more than three families living independently of one another and doing their own cooking upon the premises, or by more than two families upon a floor, so living and cooking and having a common right in the halls, stairways, yards, water-closets, or privies, or some of them.’” [3] A series of Tenement House Acts subsequently followed in 1879, 1901, and 1919. [3]
After WWII, multifamily real estate started to grow in the suburbs. The working class sought affordable, family-friendly housing outside major metropolitan areas. Garden-style apartments gained popularity during this time. These apartments are fewer than five stories tall and have extensive green space and outdoor access, typically incorporating fewer shared or community amenities.
Established in 1934, the Federal Housing Administration (FHA) served to insure home mortgage loans made by banks and other private lenders. [4] This created more favorable terms for multifamily development projects. However, coming to favorable terms took some time. According to Britannica contributor Marie Justine Fritz, FHA-insured mortgages did not initially benefit multifamily nor “low-income families, single women (unless they were widows), the non-wage-earning elderly, or racial minorities.” [4] This formally lasted until 1965, when FHA lending practices were expanded to aid “urban and minority” areas. [4] Soon thereafter, in 1968, the Fair Housing Act prohibited home financing discrimination, which stimulated growth in the multifamily domain. Backing from the federal government meant borrowers were more willing to build, rehab, repair, refinance, and buy multifamily properties.
With this, public housing initiatives materialized to address housing shortages and highlight the need for quality multifamily housing.
LATE 20TH CENTURY
Real Estate Investment Trusts (REITs) arrived on the scene in 1960, allowing investors to pool funds and invest in the purchase and sale of securities, making multifamily investing more accessible. REITs can be corporations, trusts, or associations directly investing in income-producing real estate. REITs differ from real estate funds in various ways, primarily because they regularly distribute dividends, depending on the investment structure. In contrast, funds can provide income, but they also offer value through appreciation or the increased value of a property over time. REITs do not require an investor to be accredited, while private placements, sometimes called syndication, uphold this qualification. Another important distinction is that REITs are configured to favor stability, and private placements take a less conservative approach to achieve higher returns.
As property classes emerged, investors could better benchmark for valuations and returns, establishing a shared language in the industry. Multifamily proved resilient amid mild and severe economic downturns, emphasizing the consistent demand for housing and the fact that people will always need a place to live.
MODERN MULTIFAMILY (EARLY AUGHTS TO PRESENT DAY)
As the housing market stalled and eventually crashed after the Great Financial Crisis of 2008, multifamily real estate experienced a rise in demand. While homes were increasingly foreclosed due to loan defaults, hordes of former homeowners flocked to multifamily housing. As mentioned earlier, multifamily’s appeal during this time stemmed from a demand for affordable housing, increased home prices, lower single-family home supply, liquidity (how efficiently a property can be sold at or close to market value), and changes in overall lifestyle preferences.
A study by the U.S. Census Bureau found that single-person households more than tripled from 1940 to 2020. [6] The percentage of single-person renters in 2013 beat single-person owners by a 47% margin. [5] Soon, multifamily became the “darling child” of real estate, demonstrating low volatility and stability during economic downcycles, even through COVID-19. A review of COVID-19’s impact on multifamily real estate by Sheila Marcello notes that “research from MRI Software showed a 4% increase in renewals and a 15% reduction in vacancy rates between March 15 [and] April 30, 2020, compared to the same period in 2019.” [6]
With more competition in multifamily, an increased focus on operations, amenities, environmental, social, and governance (ESG) frameworks, and other value-add strategies became essential.
ESG infrastructure is relatively new to multifamily. Scott Sowers of the National Apartment Association explains how the U.S. Government-Sponsored Enterprise (GSE) “officially invested in ESG in 2016 when Freddie Mac Multifamily launched its Green Advantage Program.” [7] This meant that until 2016, the demand for “green” or mission-driven financial services went unmet.
As of January 2025, investors recognize the U.S. multifamily real estate market as a strong foundation for long-term wealth creation.
WORK WITH BAM CAPITAL FOR MULTIFAMILY REAL ESTATE INVESTING
Multifamily real estate exposes investors to a truly diversified portfolio. It is a unique entry point for individuals seeking passive income and may provide a hedge against inflation. BAM Capital partners with accredited investors who want to enjoy passive income and all the other benefits of multifamily private placement. As the private equity arm of The BAM Companies, BAM Capital has been focusing on buying the most profitable assets and staying disciplined in its investment thesis. BAM Capital’s investment strategy aims to create forced appreciation while mitigating investor risk. To date, the brand has successfully managed over $1.7 billion in assets across ~9,000 apartment units.
Remember that no investment is risk-free. Before making financial decisions, consult your investment advisor and schedule a call with a BAM Capital investment team member.
Disclaimer: All investments carry risk, including potential loss of capital. This content is for informational purposes only and is not financial, legal, or investment advice, nor an offer or solicitation to buy or sell any security. Consult an independent advisor for personalized guidance and contact BAM Capital for details on current offerings. BAM Capital and its representatives are not fiduciaries or investment advisors. The information provided is general and may not reflect individual financial goals. Any financial terms, projections, or forward-looking statements contained herein are hypothetical in nature and should not be interpreted as guarantees of future performance or safety. Such statements reflect Bam Capital’s opinion and are subject to market fluctuations, economic conditions, and investment risks. Past performance does not predict future results. BAM Capital and its affiliates do not guarantee the accuracy or completeness of this information. Bam Capital offers investment opportunities under Rule 506(c) of Regulation D exclusively for accredited investors as defined by the SEC. Verification of accredited investor status is required prior to participating in any investment.
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SOURCES:
[1]: We Are Apartments. (n.d.). “National Data.” https://www.weareapartments.org/data/
[2]: History.com. (2023). “Tenements.” https://www.history.com/topics/immigration/tenements
[3]: New York Public Library (NYPL). (2018). “Tenement Homes: The Outsized Legacy of New York’s Notoriously Cramped Apartments.“ https://www.nypl.org/blog/2018/06/07/tenement-homes-new-york-history-cramped-apartments
[4]: Britannica. (n.d.). “Federal Housing Administration (FHA).” https://www.britannica.com/topic/Federal-Housing-Administration
[5]: Joint Center for Housing Studies of Harvard University. (2015). “The Rise of the Single-Person Household.” https://www.jchs.harvard.edu/blog/the-rise-of-the-single-person-household
[6]: GSH Real Estate. (n.d.). “COVID-19’s Impact on Multifamily Real Estate.” https://gshrealestate.com/the-covid-19-impact-on-the-multifamily-real-estate/
[7]: National Apartment Association (NAA). (2024). “ESG: Where Are We Now?” https://naahq.org/esg-where-are-we-now %20underwriting%20is%20the,real%20estate%20private%20equity%20investments.
