FROM THE PRESIDENT
SCOTT KIRKWOOD | GRIFFIS BLESSING
Take Action Through Legislation
AAMD and CAA are in the thick of an intense legislative session and we’re going to need your help before it’s over.
There are several proposed bills in the State Capitol which will substantially change how we do business if they
pass. Our efforts are paramount in terms of telling our story and preventing poorly thought out legislation. The
number of bills, proposed amendments and flurry of activity relating to them is extremely fluid.
Knowing how proposed legislation will change faster than this article might reach each of you, I wanted to simply
direct your attention to a Wall Street Journal article, and specifically the responses to it… These messages are not
only timely, but also timeless in how we continue to make our case of encouraging more affordable housing.
Rentals Everywhere, but No Place to Live
Good news: More new apartments will come on the market this year in the
U.S. than in decades. Keep reading for the bad news.
B
uilders are expected to complete some 371,000 new apartments in 2020,
compared to 247,000 in 2019 and 119,000 in 2010, according to the real-estate
analytics firm RealPage. The problem is that many of the new apartments
will be too expensive for lower- and middle-class families. RealPage data show
that in many metropolitan areas between 60% and 89% of the apartments under
construction are in neighborhoods known for higher-than-average rents.
Bernie Sanders blames this on “corrupt real estate developers” who are
“gentrifying neighborhoods” and replacing affordable homes with “fancy
condominiums and hotels that only the very rich can afford.” Elizabeth Warren
says “developers can usually turn bigger profits by building fancier new units
targeted at higher-income families rather than units targeted at lower-income
families.”
Their solution is more government control of the rental
market. But what if that is already the main problem?
In a December 2019 working paper, Harvard and University of Pennsylvania
researchers measured land-use rules, zoning and permitting regulations and
how many government entities must sign off on new construction, among other
restrictions. Though outliers exist, the mismatch between expensive supply and
affordable demand was significantly more acute in the places with the most severe
regulations.
Meanwhile, the National Low Income Housing Coalition estimated last year that
there were 30 or fewer affordable apartments available for every 100 extremely
low-income renters in Washington, Oregon, California, Florida and Arizona.
These states are home to seven of the 10 most restrictive metropolitan areas
in the Harvard-Penn study. RealPage and Harvard-Penn draw the borders of
metropolitan areas slightly differently. But Fort Lauderdale, the Seattle-Bellevue
area, Phoenix and Portland—all in the top 10 most restrictive regions—are also
where 84.9% or more of new apartments are in neighborhoods with rent generally
above the metro-area average. The restrictive cities of Miami, Washington, D.C.,
and its suburbs and Los Angeles are also in regions where only 18.7% to 35.8%
of this year’s new rentals are being built in neighborhoods that low- and middle-
income families can afford.
Last year, highly restrictive cities built ultra-luxury apartments at a higher
rate than less restrictive ones, according to data from the real-estate market-
intelligence firm Yardi Matrix. The most high-end classes of rentals accounted for
4.8% of the overall new supply in Manhattan, 3.8% in Phoenix, about 3% in D.C.
and its suburbs, and 2.4% in Los Angeles.
But premium rentals are merely 0.3% of new supply in St. Louis, 0.1% in
Cincinnati, Grand Rapids and Cleveland, and an even smaller share in Detroit and
Rochester—all among the least restrictive building areas examined by the Harvard
and Penn researchers.
The progressive solution to the lack of affordable housing—more government
rules and controls—is damaging the very people they say they want to help.
The post 'Rentals Everywhere, but No Place to Live' appeared first on WSJ.
6 | TRENDS JANUARY 2020
No Mystery About Affordable Housing Dearth
Regarding your editorial “Rentals Everywhere, but No Place
to Live” (Feb. 6): Anyone who’s paying attention to our national
housing-affordability challenges agrees that the most effective
way to get costs down for American families is building more
housing at a variety of price points, boosting supply to meet
demand. But when regulation after regulation is layered on to
construction, costs go up and new housing becomes out of reach
for too many.
A full 32.1% of multifamily development costs are driven
by government regulations—fees, standards, approval
requirements, impact studies. Nearly a third of development
costs come directly from federal, state and local governments
trying to pull the right levers and control production in the
perfect way. The result? Places with the heaviest hand of
government are hurting hardworking families trying to make
ends meet the most. Facts are stubborn things, but that isn’t
stopping central planners and rent-control fanatics from
pursuing policies that actually hurt the people they’re trying
to help. Americans deserve better. We should streamline
regulations, give people more housing options and bring costs
down.
President, National Multifamily Housing Council
(Washington)
New rentals are at higher-than-average rent prices because
constructing new housing is expensive. However, the increase in
supply of rental housing lowers average apartment rents when
the new apartment prices are added to used apartment prices.
New housing and apartment development has a multiplier effect
on housing prices. For every new home constructed and sold,
approximately two-and-a-half housing units are transacted,
either an older rental or used-home sale over a 12-month period.
Thus, new housing development, even at high prices, reduces
average housing prices. Conversely, government housing
policies intended to restrict housing prices, called affordable-
housing mandates, actually constrain new housing development
by restricting supply, which increases average housing prices.
Therefore, the way to produce “affordable” housing is the
same as the way to produce “affordable” cars: build more.
Government’s best housing policy: Do nothing.
Clifford Sondock
President, Land Use Institute (Melville, N.Y.)
www.aamdhq.org