Is Bigger Better?

Larger Apartments Buildings Cause Debates

By Erica Rascón on Sep 2, 2019 in News

Units are getting smaller as apartment buildings grow larger for the first time in history. Interestingly, these large buildings are indicative of the nation’s troubled relationship with rental housing

Characteristics of New Housing Report

Bloomberg reports that developers completed 211,000 new housing units in about 2,000 buildings with 50 or more units. That’s the largest boom on record since the late 1960s when the survey began. Bloomberg sourced its data from the Characteristics of New Housing report issued by the Census Bureau in partnership with the U.S. Department of Housing and Urban Development.

For nearly 50 years, firms focused on developments with 50 or fewer units. As land prices rise, footprints are growing smaller. Apartments are also getting smaller. In 2018, the median size of multifamily units built for rent was 1,081 square feet. That’s 500 square feet smaller than units constructed in 2008.

Why Bigger Isn’t Better

Smaller buildings have not fallen out of favor with consumers. Rather, the shift towards fewer but larger apartment buildings is indicative of dysfunction in the industry, hypothesizes Justin Fox, financial journalist with Bloomberg Opinion.

“Growing regulatory burdens, rising construction costs, and the increasing role of large institutional investors in housing-development finance have tipped the scales in favor of big projects,” he said. He continues, “zoning rules and opposition from would-be neighbors in residential areas have left urban and suburban commercial districts and exurban greenfields as about the only locales open to new housing.”

The fallout: neighborhoods are welcoming a few large-scale new developments or no developments at all.

Finding Ground for the Middle Ground

Mid-sized developments don’t have ground to stand on. Barriers to construction have stifled the growth of multifamily construction overall. Small and mid-sized projects were the first to take the axe. In short, barriers to constructions have lead to fewer projects in neighborhoods that now lack affordable and mid-priced rentals. Debate lingers on whether the nation is facing an affordable housing shortage and, if so, what should be done about it.

Some cities see the lack of small and mid-sized buildings as an issue. To address it, they are revisiting their zoning ordinances. Minneapolis eradicated single-family-only zoning. Oregon towns with populations of 10,000 and higher cannot maintain single-family-only zoning, either. Other major markets, such as Seattle and Los Angeles, have expanded permits to add new units to existing housing.

Fox concludes that cities have a long way to go before their efforts breathe life back into small and mid-sized apartment development. This is because of deeply polarized views on sprawl, infill, and perceptions on what it means to have renters as neighbors.

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