Housing affordability has reached crisis levels in many major cities and policymakers point to a general lack of housing supply: not enough homes are being built.
But a study from Apartment List, released Thursday, has found that it’s not just that housing construction is lagging, but that there’s a mismatch between the types of homes needed and the types of homes cities and metro areas are getting.
In 2018, local governments issued only 1.32 million new housing permits in the U.S., down 38 percent from a pre-recession peak of 2.16 million in 2005, according to the study. Apartment List attributes the drop to a lack of new single-family housing (down 49 percent to 855,332 units in 2018 versus 1.68 million in 2005).
Meanwhile, the number of multifamily permits surpassed its pre-recession peak in 2015 — but that hasn’t been enough to make up for the lack of single-family home construction, according to Apartment List.
“The total number of residential housing units permitted in 2018 was roughly the same as the number permitted in 1994, when the country’s population was 20 percent less than it is today,” said Chris Salviati, a housing economist at Apartment List, in a report on the study.
“While multifamily housing may be better suited to meet the demand for walkable, transit-oriented neighborhoods, local zoning codes severely limit the locations where multifamily housing can be built.
“Consequently, the slowdown in single-family construction has contributed to a tightening of starter home inventory, which may be preventing some prospective millennial homebuyers from purchasing homes.”
Apartment List’s report pushed for zoning changes that would allow construction of the type of housing called “the missing middle.” This generally refers to housing that makes cities denser while offering choices other than single-family homes or giant apartment buildings, such as two- to four-unit buildings, accessory dwelling units (ADUs or “in-law” units), townhouses, and low-rise apartment buildings.
Missing middle housing “can play an important role in increasing density and creating walkable neighborhoods, without impacting neighborhood character in the same way as mid- and high-rise apartment buildings,” Salviati said.
“Despite the benefits of this type of housing, the multifamily housing that has been built in recent years increasingly takes the form of large apartment complexes.”
Two-to-four unit properties made up just 3 percent of all permitted housing units last year, according to Apartment List. Salviati pointed to localities such as Minneapolis, Seattle and Oregon that are moving away from single-family zoning to allow for more “missing middle” housing.
“Due to high construction costs — for land, labor, materials and regulatory costs — developers build larger properties at luxury price points in order to achieve economies of scale and ensure that projects prove profitable,” Salviati said. “Zoning reform can remove bureaucratic hurdles to allow denser development in varying forms throughout a metro area.”
Apartment List found that even though multifamily construction is picking up the slack in all of the nation’s biggest markets, the largest increases in multifamily construction are in already dense metros such as New York, Boston and San Francisco — which have nonetheless failed to build enough new housing.
Apartment List puts “enough” at one housing unit built for every one to two new jobs created.
“From 2008-2018, the New York, Boston, and San Francisco metros all failed to issue enough new building permits to keep pace with job growth, contributing to the affordability crises in these coastal superstar cities,” the company said.
At the same time, Sun Belt metros such as Atlanta, Houston, and Phoenix have permitted enough new housing units to keep up with jobs, but more than two in three of the new units are single-family homes, the study found.
“It seems that the metros most effectively meeting the demand for new housing are still primarily doing so by continuing to sprawl, despite an increasing demand for dense, walkable neighborhoods that prioritize sustainability,” Salviati said.