NAREE Special Report: NMHC Identifies Signs of Multifamily Improvement
Caitlin Sugrue Walter outlines improvements in market tightness, new measures for affordability advances.
While apartment vacancies have been rising overall and rents consequently softening, there have been some signs of improvement, according to Caitlin Sugrue Walter. Speaking during the National Association of Real Estate Editors 60th Annual Real Estate Journalism Conference, which took place in Miami last week, the vice president of research at the National Multifamily Housing Council noted a decline in her organization’s Market Tightness Index, which tracks market variation on a quarterly basis.
The number of markets tighter than three months prior, with low vacancies and high rent increases, was up to 23 percent in April, up from 7 percent in January and 9 percent in October, while 24 percent were looser, down from 43 percent in January and 47 percent in October. About half have consistently remained unchanged, but that’s still a noticeable shift after overbuilding has softened many markets.
Market by market
Walter observed that it’s increasingly difficult to generalize, with both vacancies and rents varying significantly by market. While the more popular places for moves are naturally performing better, locales are also influenced by economic development activities. While San Antonio has limited labor force and business opportunities, she noted, Dallas is performing well despite continued new development because of its greater business growth.
At the same time, she said, it’s necessary to consider the longer term, and Dallas construction will be quite a bit lower than it has been within the next couple of years. Charlotte development is expected to slow by about two-thirds, and Houston and Austin amounts will decrease, as well. Construction costs remain a deterrent, although they’re not getting worse, but regulations are increasingly becoming an impediment to new development.
Walter pointed to new design restrictions as an example of more frustrating expenses at a time when, despite short-term overbuilding, there remains a severe lack of affordable attainable housing. Rather than improving safety, these local mandates are more geared toward visual elements like requiring a brick façade.
Affordability solutions
Meanwhile, relieving affordability pressures will require more construction over the long term, along with a focused effort at creating a mix of incentives. A recent NMHC and New York University evaluation of housing affordability solutions, which will be released this week, found that most states are more than 100 years away from achieving affordability. The new Housing Affordability Index found that only North Carolina is in a position to address affordability within one generation, while Utah could resolve it in two, and Colorado, Minnesota, Indiana and Washington in three.
Furthermore, depending on individual solutions would extend the time it takes to resolve the problem by decades or longer: Dependence on Low-Income Housing Tax Credits alone would be the least effective solution, with an estimated resolution in more than 250 years, while deregulation and tax abatements or reviving and retaining existing naturally occurring affordable housing by themselves would each take 34 years, and income-assistance programs alone would lake 43 years.
New Jersey’s Mount Laurel doctrine, mandating greater focus on creation of attainable housing, took more than 40 years before agreement was reached that will now encourage development of affordable housing statewide, Walter noted.
