Migration and Multifamily: What the Latest Trends Mean for Development

A Census Bureau study suggests that challenges will intensify in the nation's fastest-growing counties.

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A new snapshot of population trends from the U.S. Census Bureau’s March 2023 report sheds light into where people are going—and offers implications for multifamily development and investment.

With migration approaching pre-pandemic patterns, the scale of movement for the most populous counties declined from April 2020 to July 2022, but many of the larger patterns remain in place.

The report reveals that the fastest-growing counties by numbers are in the South and West, with counties in Arizona, Texas and Florida taking the top five spots. The counties with the largest decline are in the Northeast, Midwest and West Coast, with those in California, Illinois and New York occupying the top spots. Six of the 10 fastest-gaining counties, located in Texas, gained a combined 209,182 residents from 2021 to 2022. Three Florida counties saw a cumulative increase of 92,848.

At the same time, Los Angeles County also declined in population, yet the decrease of 90,704 residents was much smaller than the 2020-2021 decline of 180,934. All told, the ten counties with the largest declines incurred a decrease of 378,177 residents, reducing the previous year’s decline nearly in half.

Familiar patterns

To some experts, these figures represent a continuation of historic trends. Counties experiencing population growth have several factors that make them appealing to new residents, from warmer climates to relative affordability and economic opportunity, observes Glenn Brill, managing director in FTI Consulting’s real estate practice. “These migratory patterns are really nothing new,” Brill told Multi-Housing News, “as people seek a lower cost of living, better weather and economic opportunity spurred by a business-friendly environment.”

Three counties collectively serve as a noteworthy example: Collin County, Texas, part of the Dallas-Fort Worth metropolitan region: Harris County, Texas, whose county seat is Houston; and Maricopa County, Arizona, which includes Greater Phoenix. Among them, these three counties added 146,706 residents from 2021 to 2022, as their respective cities experienced large-scale commercial investment and matching employment opportunities.

Others see outward migration from regions such as New York City and Los Angeles driven by a supply-demand imbalance. “A lot of these coastal metro areas are experiencing shortages of affordable housing,” noted Rachel Drew, senior research director at Enterprise Community Partners.

Unintended consequences

Migration to the fastest-growing counties is likely to exacerbate the strain on the existing inventory  and heighten the need for expanded development.

“No doubt household formation spurs demand. As population grows, the need for development becomes self-evident,” Brill said. At the same time, the demand might not be able to be met equally especially in areas that are zoned to favor single-family development. Data from an August 2022 report from the National Apartment Association that studied apartment demand through 2035 shows that Texas and Florida rank as the top states in terms of required living space, needing a combined 1.1 million units. Paula Munger, vice president of research at the NAA does not see this as a new problem, rather, one that has built up over decades and where the only short-term solution is better policy. "While building has been strong for the past several years, we underproduced for decades. Pro-housing policies that make it easier and less costly to build will go a long way toward seeing that the demand gets met," Munger told MHN.

Every area experiencing substantial in-migration needs “(needs) more supply, especially in these newer places that are less equipped because they are overly zoned for single family,” noted Marc Norman, associate dean of the NYU Schack Institute of Real Estate. He attributes this in part to the sprawling nature of cities such as Phoenix, Houston and Dallas, which have historically taken multifamily less into account in their housing strategies.

One unintended consequence is that many of the fastest-growing cities could gain snarled traffic, climbing prices and other qualities that their newest arrivals thought they were leaving behind.  “All of a sudden, one of the main reasons for going, lower housing prices, might become a lost advantage," Norman said. "If the main driver was cost, and cost is not a factor anymore, it can be problematic down the road."

Wanted: versatility

In both areas, Drew sees a disproportionate impact on accessibility to affordable housing. “Where you are likely to see a more substantial impact is on affordable housing," she said. "As people come from higher priced areas, they will want to take advantage of places that have (it).” As such, access will be entirely contingent upon both “how much supply exists in those locations, and how quickly they can add supply to meet that demand,” Drew told MHN.

Nonetheless, this issue is also subject to local labor and material costs and other economic factors. While land may be readily available and relatively inexpensive, the ability to develop may prove challenging. “As the cost of finance, labor and material has increased, revenue forecasts need to be more robust to support development and that is a market-by-market circumstance,” Brill observed.

Reflecting the largely unchanged nature of the migration trends are solutions named by both Drew and Norman: zoning changes, which have historically been biased toward single-family, as well as incentives for additional development.

Norman stresses the need for versatility. “(Developers) will probably have to partner with the YIMBYs, because of the lack of supply, and (with) what you are able to build becoming a constraining factor,” he said.

Consequently, he sees this as an opportunity to further improve the cities experiencing in-migration. “It’s a moment of convergence (for) lenders and urban planning advocates to come around what a healthy city looks like, (one) that grows housing at the same rate as jobs, and also sustainably," he said.

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