No apartment bubble, just high demand
An old factory and a school in Schenectady are revamped for apartments. Same in Albany, in a former printing plant, a bank and an office building.
In Troy, apartments are on the drawing board for the old City Hall site. In the suburbs, complexes sprout like wildflowers.
The pace of development begs the question that Jesse Holland says he was asked a lot: Is there an apartment bubble in the Capital Region?
So Holland, president of Sunrise Management & Consulting, an Albany firm offering property marketing and leasing services, set out to find the answer.
Bottom line? No bubble, just filling a need, he says in a new report.
For many years, Holland crunched data on the local rental market, putting out biannual looks at what tenants were paying. Three years ago, he bemoaned the slowdown in apartment construction, worried it would make our already tight rental market even tighter.
Nowadays, multifamily housing makes up close to half of the new residential building permits issued annually, he says, although total permits are off the highs seen before the Great Recession.
Holland put together his report using statistics compiled by the U.S. Census Bureau and the Capital District Regional Planning Commission, both of which project steady population growth locally through 2020.
One surprise in the research, though, was the drop-off in single-family building permits following the recession — “and it hasn’t come back,” Holland told me this week.
A chart included in the report shows single-family permits drifting lower between 2009 and 2011 before turning up in 2012. Multifamily permits, though, climbed steadily through the period.
Part of the reason for the single-family decline is the slow recovery, but demand also is off, Holland says. After the credit markets seized up and foreclosures soared, younger generations “lost the confidence … that homeownership is a way to develop wealth,” according to his report.
Boomers, meanwhile, are more likely now to downsize than to move up to a bigger house. And millennials, facing a tough job market and a load of higher-education debt, are on the sidelines — or, more likely, back in their childhood homes for a while.
The bright spot there, though, is that “the large number of young adults forced to live at home during the downturn suggests there is a good amount of pent-up demand for apartment space,” says the report.
Holland foresees “steady growth in demand for multifamily housing” that is likely to continue for the next three to five years.
“Single-family construction is not near what it was; there are changes in demographics that are impacting housing choices; and the overall unit addition is well below historical levels,” he says in the report.
But rest assured, we’re not building an apartment bubble.
“While the volume of apartment development is growing, it is growing to meet demand and fill a housing shortage,” Holland says.
Marlene Kennedy is a freelance columnist. Opinions expressed in her column are her own and not necessarily the newspaper’s. Reach her at firstname.lastname@example.org.