By KIMBERLEY HAAS
The vice president of research at the National Multifamily Housing Council says 4.3 million new apartments will be needed by 2035 to meet demand.
Caitlin Walter spoke at the National Association of Real Estate Editors conference on October 13. She is primarily responsible for conducting NMHC’s research on apartment industry trends, according to the council’s website.
Walter said there were 737,000 apartments under construction in 2021.
“The issue is that it takes a long time to build an apartment community, and we’re not actually seeing those under-construction numbers turn into completions. And that is largely due to the delays that started during the pandemic that have continued to persist,” Walter said.
Walter referred to a study the council and the National Apartment Association commissioned Hoyt Advisory Services and Eigen10 Advisors, LLC to conduct.
Under a fairly conservative population increase with low levels of immigration, 3.7 million units will be needed by 2035. That works out to about 266,000 units per year, Walter said.
“But they also found that we currently are short 600,000 apartments. So we total in total need to build 4.3 million,” Walter said.
Walter said 40% of that demand is only going to be located in three states: New York, California, and Florida.
Walter talked about the difficulties builders across the United States have when meeting demand.
Research conducted by the council and the National Association of Home Builders shows that 74.5% of developers surveyed said they encountered “Not In My Backyard” opposition to a proposed development.
Confronting that opposition adds an average of 5.6 percent to total development costs and delays the completion of those new properties by an average of 7.4 months, according to the researchers.
“So that means that the developer then has to figure out a way to add that cost,” Walter said.
Walter said rent control does not work and offered other solutions to the affordable housing crisis.
The research conducted with the home builders association shows that 87.5% of respondents avoid working in jurisdictions with rent control.
Walter said rent control is not effective.
“I look at New York, and you hear about the stories that are true that folks pass it down to generations and essentially becomes a lottery system. So people who don’t need it end up getting the subsidies,” Walter said.
The research conducted also shows that 47.9% of respondents said they avoid building in a jurisdiction with inclusionary zoning requirements.
Walter said there are ways for inclusionary zoning to be effective.
“We have a tool kit that we released a few years ago that talks about different solutions to affordability. And one of those is inclusionary zoning. There is a way to do inclusionary zoning so that it works with both the developer and the locality to actually build those affordable units. But having a blanket ordinance that doesn’t allow for that collaborative process, that’s the kind of inclusionary zoning ordinance that folks avoid,” Walter said.
Regulations imposed by all levels of government account for an average of 40.6 percent of multifamily development costs, according to this research.
Eileen McEleney Woods, president of the National Association of Real Estate Editors, told The Mortgage Note in an interview that the annual conference is a networking opportunity but they also offer journalists and industry experts in attendance insight into topical issues and skills they can use.
“We have panels on social justice in the newsroom and in commercial real estate. We have an Excel workshop we’ve been running,” McEleney Woods said. “There’s a lot of business to be done, but everyone is approachable, which I really, really like, and you find that you have a lot of people who come back year after year because of the insight they gained from the panels, and the discussions, and the leads they get from the networking, but they also build lasting friendships and sources.”
Challenges for homebuilders, creating affordable multifamily projects, the shifting rental market, and the economic forecast for 2023 were among the topics chosen for this year’s conference, which ended October 14.
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