A Fireside Chat With Ron Terwilliger: MHN Summit

Multi-Housing News’ Editorial Director Suzann Silverman presented the magazine’s second-annual Lifetime Achievement Award to Ronald Terwilliger, founder & chairman of the J. Ronald Terwilliger Foundation for Housing America’s Families and non-executive chairman of Terwilliger Pappas Multifamily Partners. Terwilliger received the honor during a virtual fireside chat at MHN’s annual Excellence Awards event on Dec. 2.

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Silverman: What do you consider the most significant factors that have caused the greatest changes in the multifamily industry over course of your career?

Terwilliger: Housing is a fundamental human need—food, clothing and shelter are basic human needs. The demographics have shown that about one out of three people in this country rent. We’re serving a demographic that wants rental housing, but they all don’t want apartments. Single-family homes have become one of the great new industries. One out of three people who rent, rent single-family. One of the big single-family companies owns 80,000 to 85,000 units and made economic sense out of how to manage them.

It’s just meeting the demographics and changing your product to evolve as people’s tastes evolve. There are more people working from home. There continues to be a need for rental housing.

I have to say that 2021 was the most extraordinary year I ever seen in rental housing, at least in the market-rate rental housing industry.

Silverman: What has really stood out for you about 2021?

Terwilliger: It was just the surge in pricing of market-rate rental throughout 2021. We had a project in December 2020 that brokers said was worth $295,000 per unit and six months later we sold it for $395,000 per unit. We have also seen extraordinary rent growth and absorption. In my main company, we budget absorption at 20 units per month. This year, absorption averaged probably 40 units per month, and one of our projects saw absorption of 60 units per month. That’s being offset now by extraordinary movement upward in construction prices, which makes the affordability challenge for lower-income people as great as it has ever been.

Silverman: What are the biggest impediments to solving the housing crisis?

Terwilliger: In a word, it’s income. That is the problem in the United States and around the world. There is not enough income for a large swath of our population to afford market-rate housing. We are all trying to figure out what we can come up with creatively to add to supply.

We need to increase the supply of housing and get the private sector to re-engage as it did in the early 1980s in building mixed-income housing. And we need to provide significant support to low-income people. Section 8 vouchers serve an important purpose but only one in five who are eligible can obtain them, and many landlords won’t accept them. We must get these units into high-opportunity neighborhoods where they should be.

Silverman: So where do you start?

Terwilliger: Some of this is going to require bipartisan legislation as housing should be a nonpartisan solution. It is a remarkable thing how little attention Congress and the president have paid to housing over the years. We need to get Congress to become more aware of the problem and be willing to allocate more resources. At same time, we have a big NIMBY, or Not in My Backyard, problem. The affluent suburbs have some of best opportunity neighborhoods for kids to get access to decent schools. But they fight tooth and nail to prevent apartments from being developed in their neighborhoods. It’s one of the reasons we don’t get housing where it should be and don’t get nearly enough.

Silverman: Beginning with Congress, is there enough of an impetus on both sides of the aisle to come together on this?

Terwilliger: Housing is really a basic human right, but governments don’t feel that way about it and don’t fund it. It tends to get lost behind education and healthcare funding. I walked the halls of Congress with my foundation for three years and talked to around 60 senators. The first thing I had to do was explain to them there was a housing crisis in this country. They didn’t know about it. Then I had to argue it mattered that Americans didn’t have affordable homes. Then I had to prescribe how to fix it, which is basically more subsidy on the supply side and more subsidy on the demand side and a strong preservation focus.

Silverman: What other trends are you currently watching for the industry?

Terwilliger: Many in our industry are focusing on making sure people can work from home. When we build one-bedroom units now, we try to make sure there’s a workstation. We also ensure there are some common areas where people can take their computer and work there.

Many families are looking for single-family rentals, so companies in my industry are getting involved in single-family rentals. We’re going to complete our first project near Orlando. Families tend to avoid multifamily spaces as they want a little bit of a backyard for their kids to go out into.

The affordability challenge may result in some smaller, micro units or co-living units, with adults living in a student housing context. There’s got to be something to provide more affordable housing. The combination of rent increases and the continued rise in land prices is going to price more and more Americans out of the market. They’re going to be doubling up or trying to find an affordable unit but there just aren’t enough of them. We are approximately 7 million homes short of rental housing in this country.

Silverman: Looking back more broadly, what do you consider to be the industry’s biggest achievements over the course of your career?

Terwilliger: I think the multifamily industry has been responsible in largely avoiding overbuilding. To get anything financed you must have a really viable site, a market need and a product defined appropriately. The combination of industry players and the people who finance have kept us in pretty good bounds.

We have also adapted to evolving trends, such as using renters using social media and online listings to find apartments. Virtual technology has become very helpful in identifying your project to prospects as a place they want to live.

Silverman: Any final words of advice for the industry?

Terwilliger: Nadarajan “Raj” Chetty, the William A. Ackman Professor of Public Economics at Harvard University, once did a study that showed the ZIP code you’re born in is likely to determine the outcome of your life. You get multigenerational poverty because people can’t attend decent schools and get a good job to pull themselves out of poverty. We need to have affordable housing and have it in the right places in this country, so lower-income people have a chance. We must give them a hand up and let them do as much as they can instead of keeping them down by never giving them a chance.