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Affordable rental housing nose-diving in fastest growing metros

by  | Corporate
Posted:     Updated: Jul 2, 2019  16:19 ET
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Stock in affordable rental housing has plummeted in the country’s fastest growing cities, according to the latest data from Freddie Mac’s Multifamily Research Center.

Apartment building unitsThe issue has been a longstanding one in dense, sprawling gateway markets like New York and Miami, but Freddie Mac found that the issue isn’t isolated there. Metros with higher rates of population growth are losing affordable units at rapid paces, and “in the nation’s fastest growing areas, the issue is alarming.”

Those fastest growing cities, where populations have skyrocketed by more than 15% recently, have seen the number of multifamily rental units affordable to very-low income (VLI) households deplete at a rate nearly twice as fast as the rest of the country. In 2010, 55.7% of rental units nationwide were affordable to VLI households. By 2017, this percentage had tumbled to 39.1%, or a loss of 2.4 million VLI-affordable units — a loss of 16.6% in seven years. The 10 fastest-growing metros in the country, on the other hand, saw a decline of 32.7% in that same timeframe.

To aggravate matters, not all of the remaining stock is available to VLI renters, as higher income renters may occupy some of those units. Additionally, the calculation assumes “very low income” as 50% or less of an area’s median income. Renters with incomes below 50% of the area median would naturally have a lower share of units available to them.

In some cases, such as in Austin, Texas, and Denver, the cities actually began that seven-year period with a higher percentage of units affordable to VLI households than the national average but ended it with a lower percentage. Denver’s case is particularly stark; in 2010, there were about 167,000 VLI-affordable units, but only 67,000 in 2017, a VLI-affordability percentage change of 72.6% to 25.9% in just seven years.

Austin presents its own interesting picture. The Lone Star capital grew by 22.5% from 2010 to 2017, fastest among the top 50 metro areas in the United States. In 2010, the city had 66% of its rental units available to VLI households. That share sank to 31.9% by 2017, seven points below the national average. But Austin actually saw significant rental housing supply growth during that seven-year span: The total number of VLI-affordable multifamily units dropped by 42.7% even as the number of multifamily rental units grew 19.9%.

“Nearly a quarter of Austin’s units were built after 2009 and a high percentage of these new units are not affordable for very low-income renters,” said Steve Guggenmos, who leads Freddie Mac Multifamily’s research and modeling team. “Like a lot of cities, they just can’t keep up.”

Guggenmos and Freddie Mac’s other researchers drew a clear correlative line between population growth and VLI stock loss. While the team stressed that this association isn’t enough to conclude causation, “the cause and effect relationship between these two variables fits intuition,” the report said.

“Cities that have experienced aggressive population growth have struggled to build enough rental housing to meet the increased demand,” added Guggenmos. “The problem continues to get worse, and every year more very low-income families are forced to spend more of their income on housing.

“The old laws of supply and demand are showing their teeth and the people who can least afford it are getting bit.”

Topics: Residential economy | Residential other
More by: SGM Corporate Technology


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Affordable rental housing nose-diving in fastest growing metros

by SGM Corporate Technology | Corporate
Posted: Jun 27, 2019  15:34 ET    Updated: Jul 2, 2019  16:19 ET

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