After the sub-prime mortgage blowout in 2008, there were uncountable housing evictions. As well, many homeowners stretched beyond the limit of their resources abandoned their underwater mortgages (more money is owed to pay off the mortgage than the house is worth).
For those forced to abandon the dream of their own house, the rental market was the only escape hatch from homelessness. This in turn put enormous pressure on the rental stock in America. Vacancy rates everywhere have shrunk drastically. As a result, rental prices have risen, inevitably squeezing out poorest, particularly those with government rental assistance that landlords generally try to avoid if at all possible.
The rental demand triggered in this ‘Great Recession’ of 2008 has only increased over the last decade, as the high cost of housing makes it difficult or impossible for many first time buyers to currently (if ever) become home owners. The demand for rental housing is surprising unprepared city councils, who are waking up to discover that the majority of residential taxpayers are renters.1
In some of North America’s largest cities that are benefiting(?) from out-of-town (and state and county) investment renters, the supply of high end apartments may be less problematic. When demand for investment apartments is high, investors may be happy to flip apartments before they are even built, leaving the issue of who lives in them to others. However, in cooling markets with interest rates edging upwards, profitable apartment speculation may require renting for a period of time, preferably at rents high enough to cover mortgage payments.
Ultimately, this speculation drives up the cost of apartment rental. And for those who can afford it, there are pricey apartments galore when investors are unable to immediately flip apartments in order to make a quick profit. These high end rentals are of no use to people with low incomes, needless to say.
So why is the housing industry not stepping in more forcefully to profit from the demand across a range of rental prices? A recent study by the industry shows that of several principal reasons, one stands out in particular as a roadblock to apartment construction.
For a continent still in love with the idea of single-family detached housing, the answer is easy to guess. Most people are quite happy to acknowledge the need for more homes to solve the current affordable housing crisis effecting communities everywhere. “And developers can build apartments anywhere, just not in my back yard.” Read more in HOUSINGWIRE: New Study Shows NIMBYism Is The Biggest Multifamily Construction Barrier
The National Apartment Association (NAA) in the United States sponsored the study, which draws on survey data gathered from private firms in the development industry, municipal planning officials and non-profits. For the NAA’s opinion see Multihousing Pro: Barriers Worsen Housing Affordability
For the full report, see NAA: Barriers to Apartment Construction Index
Footnotes
- Read more on this phenomenon in the Twin Cities Pioneer Press: As St. Paul Becomes A City Of Renters, Officials Say They Deserve More Attention
