ORLANDO, FL - New job creation amid a slowly recovering economy is creating increased demand by new renters seeking to move into apartments. However, the lack of credit needed to finance the development of apartments is already causing rents to increase and is likely to lead to a shortage of available apartments in the next few years.
Source: National Association of Home Builders
"Although we are forecasting construction of 133,000 new multifamily residences in 2011," said the National Association of Home Builders' chief economist, David Crowe, "that is far short of the 250,000 to 300,000 units that would be required to keep supply and demand in balance. In addition, we have yet to make up for the insufficient number of new apartments that should have been built over the last two years. The capital needed to finance that construction is just not available to apartment developers."
Multifamily developer Bill McLaughlin, an executive vice president of the Avalon Bay Company, a real estate investment trust headquartered in Washington, D.C., said he sees demand for apartments increasing, but notes that the cutback in multifamily development in 2009 and 2010 has resulted in a "woefully inadequate supply" of new multifamily rentals to meet the rising demand.
Private development firms bore the brunt of the constrained supply of capital. Jay Jacobson, national partner for acquisition and investment for Wood Partners, Boca Raton, Fla., said "The market is telling firms to build and acquire, but capital is still extremely difficult to find."
Even affordable rental housing is feeling the pressure. Robert Greer is president of Michaels Development Company, Marlton, N.J., a company that develops and manages affordable rental communities throughout the country. According to Greer, "Affordable housing, which is primarily driven by the Low-Income Housing Tax Credit program, is rebounding. Investors are slowing coming back into the market, and deals are getting done...which is good news. But the bad news is that given the depth of the current recession, more people than ever need affordable housing, and the demand far outstrips the supply."
The National Association of Home Builders is a Washington-based trade association representing more than 160,000 members involved in home building, remodeling, multifamily construction, property management, subcontracting, design, housing finance, building product manufacturing and other aspects of residential and light commercial construction. NAHB is affiliated with 800 state and local home builders associations around the country. NAHB's builder members will construct about 80 percent of the new housing units projected for this year.