Mark Halloron, Director GRS | Corteq

Mark Halloron, Director
GRS | Corteq
(732) 450-8960

In the multifamily sector of commercial real estate, one of the biggest roadblocks cited when forecasting the future, is the potential for the overbuilding of apartment complexes in certain areas.

The fear is that the sector, which has performed exceptionally well coming out of the recession, is starting to overheat, and developers’ building plans might be overzealous in certain areas where the demand could wane with more product on the market. This could lead to a dip in occupancy and rental rates.

But on a different side of the spectrum, there is a problem just as, if not more, dire.

The shortage of affordable multifamily rentals is, by many accounts, a major problem facing metro areas throughout the country. A report released this year by the National Low Income Housing Coalition (NLIHC) says that there is a shortage of 7.2 million affordable rental units in the country, and extremely low-income households number 10.4 million, making them 24 percent of all renters in the United States. Large metro areas with the smallest amount of affordable housing units per the rental population are Las Vegas and Orlando, with only 15 spots for 100 overall renters, followed by Los Angeles and San Diego, each with 17. Boston and Pittsburgh each has the most, at 46 each, while Cincinnati has 42, and Cleveland is at 41.

In Houston, and other parts of Texas, a lack of affordable rentals makes it especially difficult coupled with rising costs of single-family homes.

The problem with this sector of multifamily is that the cost of land and construction in major metro areas well outweighs the returns developers can recoup through low-income rents without government assistance.

Some major cities are seeing the benefits of subsidies, though. The Department of Housing and Urban Development is contributing $132 million through its Choice Neighborhoods Initiative toward affordable urban apartments in five cities: Boston; Camden, N.J.; Denver; Louisville, Ky.; and St. Louis.

Plenty of other government organizations, through municipalities, counties and states, have similar programs to offer developers breaks on building new apartments. However, the demand far outstrips the funding available, and with the coming presidential administration it is tough to know how the issue will be dealt with going forward by Donald Trump’s choice to head HUD, Ben Carson, who has not always been seen as an affordable-housing proponent.

But with perceived over supply and a big demand for affordable housing in the multifamily sector, the conundrum is ironic.

What do you see as solutions to the country’s affordable housing problem?