U.S. Needs 4.3M More Apartments by 2035 to Address Demand Deficit and Affordability

Nation Faces 600,000 apartment deficit, 4.7 million fewer affordable apartments ARLINGTON, VA | July 27, 2022 – Amidst demographic shifts and lingering pandemic impacts on the population and broader economy, the U.S. faces a pressing need to build 4.3 million new apartments by 2035, according to a new study commissioned by the National Apartment Association (NAA) and the National Multifamily Housing Council (NMHC). Based on research conducted by Hoyt Advisory Services and Eigen10 Advisors, LLC, commissioned by NAA and NMHC, the data include an estimate of the future demand for apartments in the United States, the 50 states, and 50 metro areas, including the District of Columbia. For the purposes of this study, apartments are defined as rental apartments in buildings with five or more units. The data are available on the website www.WeAreApartments.org. Key findings:

• Shortage of 600,000 apartment homes. The 4.3 million apartment homes needed include an existing 600,000 apartment home deficit because of underbuilding due in large part to the 2008 financial crisis.
• Loss of affordable units. The number of affordable units (those with rents less than $1,000 per month) declined by 4.7 million from 2015 to 2020.  
• Homeownership. Apartment demand also factors in a projected 3.8% increase in the homeownership rate.
• Immigration. Immigration is a significant driver of apartment demand, and levels tapered before the pandemic and have remained low. A reversal of this trend would significantly increase apartment demand.
• Texas, Florida, and California. These three states account for 40% of future demand and will require 1.5 million new apartments by 2035.

“The U.S. has undergone tremendously difficult conditions that have fundamentally altered our nation’s demographics, but one thing remains certain – there is a need and demand for more rental housing,” said NAA President and CEO Bob Pinnegar. “Put simply, we do not have enough housing. The U.S. must build 3.7 million new apartments just to meet future demand, on top of a 600,000 unit deficit and loss of 4.7 million affordable apartment homes. It is time to reverse course after decades of underbuilding, and instead pursue responsible and sustainable policies that will not only meet this demand but address the missing middle and loss of affordable housing stock.” “The lack of available housing is holding our country back. Whether it is a multifamily residence, duplex or single-family home, we need a massive supply of new for sale and rental homes – including millions of new apartments by 2035,” said NMHC President and CEO Doug Bibby. “Making sure everyone has access to quality, affordable housing is a bipartisan issue, and the industry stands ready to do its part to help create the 4.3 million new apartment homes our country needs.” In conjunction with the study’s release, the website www.WeAreApartments.org breaks down the data by each state and 50 key metro areas. Visitors can also use the Apartment Community Estimator – or ACE – a tool that allows users to see the trends in their state or metro area to determine the potential economic impact locally.

---

Source: U.S. Needs 4.3M More Apartments by 2035 to Address Demand Deficit and Affordability https://www.creconsult.net/market-trends/u-s-needs-4-3m-more-apartments-by-2035-to-address-demand-deficit-and-affordability/

Equity Residential CEO Says Rents Will Keep Climbing Outrun Inflation

• Equity Residential CEO Mark Parrell on Wednesday said he's not sure just how high rents would get.
• But he said he expected that whatever inflation was — they'd increase by more than that.
• Parrell also said typical residents of Equity Residential's luxury units could afford increases.

As American renters continue to reel from rising housing costs, Wall Street investors are betting that housing will get even pricier relative to the costs of other goods and services. While Equity Residential CEO Mark Parrell says he doesn't know how high rents will be in the long term, he adds that they are likely to outpace inflation. One of the largest owners of rental housing in the US, Equity Residential operates more than 80,000 luxury units across 210 buildings in places from longtime hubs like New York City to pandemic hot spots like Austin, Texas. "I think you should expect that apartments, especially in our portfolio, are optimized in a way with our pricing engine that we can continue to have a real return that exceeds the rate of inflation," Parrell told analysts Wednesday on the company's second-quarter earnings call. The consumer price index — which is used to measure the rate of inflation — rose by 9.1% from June 2021 to June of this year. Economists predict it will probably level out at about 8.6% by the end of the year. If Parrell's business calculus is right, then, rents would go up by more than 8.6% in 2021. In the average year, he added, rent grows by about 3.5%. Clearly, a big difference. And some might ask how rents could keep growing after a record-shattering year in 2021 when rents across the US rose by 10.1%. Parrell cites the simple economics of supply and demand, arguing that there are still many more people who need housing than there is housing available. "With inflation the way it is, the numbers are likely to be a fair bit higher because supply and demand are still also good," Parrell said. Buoyed by increasing rents, Equity Residential reported a net income of $223.3 million with a 14.6% increase in funds from operation per share,  an alternative to earnings per share used by real-estate firms. And according to him, people are willing — and able — to pay higher rents. He said in the earnings release that his firm viewed its "affluent resident base as more resilient to rising inflation due to higher levels of disposable income and lower relative rent-to-income ratios." For instance, he said, renters of Equity Residential's units in New York City put about 18% of their income toward rent, so renters can handle increases.  A personal-finance rule of thumb is that people should spend 30% or less on rent. Population-level research, however, shows that not everyone can absorb higher housing costs so easily. According to US Census Bureau data from 2020, 46% of those polled said they spent more than 30% of their income on rent. People putting over that much of their income towards housing expenses are known as "house poor," according to Bankrate, and they may be forced to skimp on other necessities to afford a roof over their heads.

---

Source: Equity Residential CEO Says Rents Will Keep Climbing Outrun Inflation https://www.creconsult.net/market-trends/equity-residential-ceo-says-rents-will-keep-climbing-outrun-inflation/

EXP Partners

eXp Commercial Partners eXp Commercial Partners provide our clients with the best-in-class services needed to complete a streamlined cost effective successful transaction: - Commercial Real Estate Financing - 1031 Exchanges - Cost Segregation Studies - Commercial Appraisals - Property Tax Appeals - Title Insurance https://www.creconsult.net/partners/

Commercial Real Estate Symposium Sep 19th & 20th 2022

 

Request Access

eXp Commercial is hosting the Commercial Real Estate Symposium on September 19-20 2022! Register now to reserve your seat. Hear from the industry’s top leaders, national economists, and thriving entrepreneurs on the future of the commercial real estate. Dates: September 19-20, 2022

Location: eXp Commercial Campus Request Access Time: 7 a.m. PST - 3 p.m PST

The Commercial Symposium connects CEOs, presidents, owners, and CRE leaders with top agents and brokers to drive innovation in the commercial industry.

Featured presenters include: - Glenn Sanford, Founder + CEO of eXp World Holdings, to provide welcoming remarks and updates on the latest innovations at eXp. - Kevin Harrington, the original "shark" on the hit TV show Shark Tank, shares the most effective methods and procedures to find and catch investors and scale your business exponentially. - Jason Gesing, CEO of eXp Realty, and Jeff Whiteside, CFO and Chief Collaboration Officer of eXp World Holdings, to provide company updates. - Michael Valdes, President of eXp Global, to discuss international commercial real estate opportunities. - Craig Kaplan, Chief Customer Officer of Virbela, an eXp World Holdings company, to discuss the pivotal role the metaverse plays in providing businesses with solutions for hybrid- and remote-work options. - KC Conway, Founder, and President of Red Shoe Economics is a recognized expert in commercial and investment real estate with deep knowledge of capital markets, the new regulatory environment, and the availability of data and how it’s reshaping today’s commercial real estate transactions. - Mike Miller, Founder and Chief Operating Officer of Enriched Data, an industry leader that provides nationwide property, ownership, and sales data with state-of-the-art valuation, prediction, and reporting applications for commercial real estate professionals. RSVP today!

Request Access

 

 

https://www.creconsult.net/market-trends/commercial-real-estate-symposium-sep-19th-20th-2022/

What a Recession Could Mean for Multifamily

Limited multifamily construction will help sustain the sector even if demand cools.

Slowing construction will likely keep multifamily supply and demand in balance for some time despite fears of a recession, according to some analysts.

“Even if multifamily demand cools, limited multifamily construction will help sustain the sector,” a trio of economists from Moody’s write in a new report, adding that “housing substitutability” can transfer demand to the sector. Would-be owners of single-family homes are opting to rent instead of buy as the average property is now nearly 44% more expensive than in 2019—and that in turn is driving increased demand for multifamily units.  It’s also being amplified by the rising short-term rate and the impact of those increases on mortgage rates, and Moody notes there are already signs of markets cooling in some of the cities where prices went up most quickly over the course of the pandemic.

“Although this may not lead to a widespread slashing of housing prices everywhere, housing price declines are a real possibility in the next few quarters or years depending on how severe and how long the next recession will be if there is one,” Moody’s report notes.  “Multifamily rents, on the other hand, are generally slower to respond to rising interest rates and remain more stable. If the substitutability within housing matches the Great Recession’s strength, then multifamily rents may remain elevated for some time until single-family housing stabilizes. Based on the past few recessions, the effect on multifamily performance may not begin until near or after a recession ends.”

Low unemployment and a tight labor market are also likely to sustain multifamily demand—which was not the case in previous recessions (as in the 1980s, when unemployment topped 9%). But while household balance sheets are generally faring better than in previous downturns, disposable personal incomes are shrinking.

“As the multifamily and single-family home affordability crisis intensifies across more and more metros nationwide, this diminishing financial safety net is troubling, even for multifamily,” Moody notes. “Job losses or affordability issues could force some renters to find roommates or put off that move to single living.”

The Moody’s analysts also note that strengthened financial regulations “could be a blessing” for multifamily.

“Even if the Federal Reserve fails to engineer a soft landing this year or next, these rules will likely prevent the real estate market from sliding into a deep and long recession or suffering large aftershocks,” the trio writes. “While many single-family markets will likely see small to moderate prices decline in this situation, multifamily’s positive performance should hold up relatively longer, as in previous downturns. Overall, in a mild recessionary environment, we would expect only a moderate vacancy rate increase and rent growth to simply decelerate. A slight and short-lived dip into negative territory towards the end of the recession is possible, but a free fall is highly unlikely.”

---

Source: What a Recession Could Mean for Multifamily https://www.creconsult.net/market-trends/what-a-recession-could-mean-for-multifamily/

Call For Offers Kankakee

Call For Offers - Fully Occupied 23-Unit Multifamily Offering Listing Broker: Randolph Taylor 630.474.6441 | rtaylor@creconsult.net Property Website: https://properties.expcommercial.com/1030907-sale

NAA Supports FY2023 Appropriations that Expand Multifamily

Fiscal Year 2023 (FY23) appropriations are in full swing. The House has already quickly passed its proposals out of the subcommittee and full committee including the spending bill which includes funding for the U.S. Department of Housing and Urban Development (HUD). For 2023, the committee recommends an increase of $8.9 billion for the Department of Housing and Urban Development. Here are some key highlights:

Housing Affordability

• Renewal of tenant-based vouchers ($26.1B);
• Incremental vouchers to expand housing opportunities ($1.1B), adding more than 140,000 new incremental vouchers to expand affordable housing opportunities for low-income people in America including those experiencing or at risk of homelessness and approximately 5,600 new units for seniors and persons with disabilities.

Recently, our advocacy in support of legislation to improve the Housing Choice Voucher (HCV) program led more than 50 organizations to sign a letter of support calling on the House and Senate Appropriations committees to include it in the fiscal year (FY) 2023 appropriations bill funding alongside key policy provisions.

Additional Appropriations

• Community Development Block Grant Program ($3.3B);
• Lead hazard reduction and healthy homes ($65M). For competitive grants to reduce residential health hazards, including lead-based paint, carbon monoxide, mold, radon, and fire safety, of which not less than $25M for lead-based paint hazards;
• Climate resiliency and utility efficiency ($75M). To further the Department’s goal of energy-efficient housing construction and climate resiliency;
• Eviction Prevention ($20M). Providing competitive grants to nonprofit or governmental entities to provide legal assistance, including assistance related to pretrial activities, trial activities, post-trial activities, and alternative dispute resolution, at no cost to eligible low-income tenants at risk of or subject to eviction;
• Department of Homeland Security: National Flood Insurance Program (NFIP): $222.5M for FY23.

What’s Next

The Senate has yet to introduce its spending bills for FY23. It is unlikely that all of Congress will pass its spending bills by the end of this fiscal year (Sept. 30, 2022); however, it is highly unlikely in an election year that there will be a government shutdown. We expect that Congress will pass a continuing resolution that will fund the government at current spending levels until sometime before the end of the year when the 117th Congress will adjourn or into 2023.  NAA will continue to monitor and support spending priorities that will benefit housing providers.

---

Source: NAA Supports FY2023 Appropriations that Expand Multifamily https://www.creconsult.net/market-trends/naa-supports-fy2023-appropriations-that-expand-multifamily/