If you’ve been paying attention to the generative AI space over the last couple of years, you’ve probably picked up on a recurring theme: AI has the potential to upend the labor market and economy. Leaders in the industry aren’t shy about their outlook with many believing AI is poised to reshape the labor market in fundamental ways. As multifamily professionals, we can’t ignore how that might trickle down to the very renters who fill our units.
This wave appears different than other technological paradigm shifts. Unlike prior rounds of automation that mostly hit blue-collar or repetitive manual labor, generative AI is taking aim at white-collar knowledge work. Coders, analysts, writers, even attorneys, could see their roles redefined, augmented, or, in some cases, outright automated. Meanwhile, roles requiring physical presence such as nurses, plumbers, and restaurant staff, appear relatively safe, at least in the near term.
So, what does that mean for multifamily industry? If jobs evolve, so does housing demand. The where, how, and for whom apartment living could be entering a new era. Let’s break it down.
It’s becoming clear that the first wave of displacement will hit roles built on routine, rules-based tasks. Think office support staff, clerical positions, and call center roles. The World Economic Forum recently noted that 40% of employers plan to reduce headcount in areas where AI can automate tasks. And this isn’t just limited to the lower rungs, junior software developers, financial analysts, and legal associates are also in the crosshairs.
But here’s the nuance: high-skill jobs aren’t vanishing, they’ll likely evolve. In a report published by the McKinsey Global Institute, they argue that roles in STEM, design, finance, and law will more likely be augmented than replaced. An attorney won’t be replaced by AI, but they’ll become more efficient. Same with software developers and financial analysts. That added efficiency doesn’t always mean job loss, at least not right away.
Even the U.S. Bureau of Labor Statistics projects job growth in many of these industries through 2033. Software developers are expected to grow by nearly 18%. And let’s not forget, this kind of disruption also creates entirely new jobs. “Prompt engineer” wasn’t even a thing two or three years ago, now it’s a legitimate job.
How fast is this all going to unfold? That depends on who you ask.
Some AI leaders like Dario Amodei (CEO of Anthropic, maker of Claude AI) are sounding the alarm: he believes half of all entry-level white-collar jobs could disappear within five years. That kind of disruption could push U.S. unemployment into double digits.
It’s an aggressive prediction and maybe even a stretch, but the velocity of change is hard to ignore. ChatGPT reached 100 million users faster than almost any other consumer tech product in history. By late 2024, nearly 30% of American workers were using generative AI on the job in some capacity.
That pace matters. Past technological revolutions took years and even decades to ripple through labor markets. This one’s moving at breakneck speed. For multifamily investors, a reality check on the near-to-mid-term implications is crucial.
AI’s impact likely won’t play out evenly across the map of the U.S. Some regions will ride the wave. Others may get left behind.
The places with the most AI exposure aren’t always the ones you’d expect. A Brookings study showed that white-collar metros often considered “safe” in past tech shifts are now among the most exposed to AI disruption. In San Jose, nearly 43% of jobs could be significantly affected by AI, compared to just 31% in Las Vegas.
However, high exposure doesn’t mean decline. It means transformation. The markets best positioned to attract AI investment are also the ones best positioned to reinvent themselves. Multifamily demand in these metros may not fall, it may shift to a more affluent, more tech-savvy renter base.
What markets have the potential for the negative effects of AI automation? Markets with a high concentration of routine, back-office jobs—whose economies rely heavily on call centers or transactional support work may face significant headwinds.
What does all this mean for renter income profiles? In short: more polarization. High-skill professionals who can leverage AI will do very well. Skilled tradesmen and lower-skill service jobs may continue to hold steady. But it’s the middle office worker that’s at risk.
Clerical staff, data-entry workers, routine administrative roles, many of these jobs are vulnerable. We’re staring down an hourglass economy: fat top, fat bottom, and a thinning middle. And that has real implications for how to think about rental demand.
High earners will continue to drive luxury leasing. Low earners will seek affordability wherever they can find it. The middle? They might double up, move out, or drop down the quality spectrum to maintain affordability.
We’ve seen this dynamic before. Globalization and offshoring gutted parts of the American middle class. Generative AI could accelerate a similar trend but this time it hits the office, not the factory.
For investors, the most interesting and most uncertain segment may be Class B.
A few possible outcomes:
Meanwhile, Class C and affordable housing could benefit from rising demand, but with caveats. Rent growth has limits in that segment, and the risk of delinquencies or turnover rises if wages don’t keep up.
So, what’s the play if generative AI upends the labor market?
If this “AI realignment” plays out as outlined above, the implications for multifamily are clear:
And perhaps most importantly: watch the middle class. Whether it erodes or gets rebuilt will determine the shape of the multifamily market in the next decade. If public policy, upskilling, and industry innovation can help rebuild that center, the Class B segment might emerge as the strongest segment in multifamily. But if the middle keeps thinning, investors will need to adapt—quickly.
In our next post, we’ll zoom in on the markets most likely to win or lose from the AI revolution. We’ll look at the geographies positioned to attract new residents and the ones at risk of population decline.
