Growing demand, inadequate supply and rising development costs have created the perfect storm. The U.S. needs 4.6 million new multifamily units by 2030 to meet demand, and we’re already falling behind.
Not only is the number of U.S. renter households growing – 43.8 million in 2016, up from 35.7 million in 2000 – the number of high-income renter households is growing – 9.2 million in 2016, up from 7.2 million in 2000. To meet this changing demand, more Class A assets and high-end condominiums are coming to market, as it is virtually impossible outside of the Low-Income Housing Tax Credit program to produce housing for low-and middle-class renters. Demand outpaced supply for these affordable units to the tune of 1.2 million from 2000 to 2016.
Rethinking Public Policy
Local, regional and state policies governing and impacting new development should be tailored to the dynamics of the specific community. For example, a city that’s out of space for new development may need to rethink the best use(s) for its public land, while a city with highly restrictive zoning requirements may need to rethink its position on density.
As policymakers, developers and the community-at-large collaborate to create a climate that is conducive to new multifamily development, it is important to keep in mind:
- Development costs are continuing to rise. Land costs alone have risen 100% since 2000, while hard costs have increased by 57%. Additional studies, approval delays and property tax increases all contribute to those costs and may be areas where municipalities can help deliver a lower price point.
- Property tax incentives can help increase supply and lower asking rents. When communities offer tax incentives, they reduce operating costs and make it easier for developers to do business in the community while helping to increase the supply of affordable housing.
- Multifamily development is good for the economy. A 2013 report from Smart Growth America notes denser development generates 10 times more tax revenue per acre than conventional suburban development.
With 46% of renters already struggling to afford rent – that’s 20 million households – finding ways to increase the supply of multifamily housing in urban communities is critical. By fostering an open dialogue between government and the multifamily industry, leaders can develop policies that bring new, affordable inventory to market and meet the needs of the growing renter community.
Doug Bibby is President of the National Multifamily Housing Council (NMHC) in Washington, D.C. For more information on solving the nation’s affordable housing crisis, click here to view NMHC’s recently released Housing Affordability Toolkit.