The economic trends of the last 10 years have seen a decline in home ownership and a dramatic increase in apartment rentals. Data indicates absorption (rented) rates of new apartment communities in 2015 show significant growth, but there has been a focus on the construction of high end luxury apartments for many years. Developers and builders are having to refocus on the market for small and average-sized, privately financed, unsubsidized apartments – that people can afford to rent.
In Building Design and Construction, an online magazine, Senior Editor John Caulfied reported that a recent survey by RENTCafe, a nationwide apartment search website, showed the average new apartment is 8% smaller than that of 10 years ago. The report estimated that the average apartment in the U.S. is 889/sf. The southeast as a whole is on the high side at 974/sf., Atlanta having the largest average size two-bedroom apartment at 1,125/sf. Nationwide, the average new apartment is 934/sf., down from 1,015/sf. ten years ago. The report indicates that new two-bedroom apartments and luxury apartments have actually grown in size by 1% in the last 10 years, and that new studio apartments have seen the greatest shrinkage at 18%.
The Building Design and Construction article also states this more concerning trend - that rents are dramatically increasing. The average monthly rental nationwide was $1,050 in January of 2014. An excerpt from a Fox Business article in an online architectural magazine recommends that no more than 25% of your take-home pay should go toward rent or a mortgage payment. Therefore, if I am renting an apartment at $1,300/month + power utilities at $100/month average, my monthly income better be $5,600/mo. Or about $62,000/year. It is easy to see why a lot of people are forced out of the average housing market.
“Apartment rents are breaking record after record, with the national monthly rent hitting an average of $1,204 in May (2016). In San Francisco, you’ll still be paying $2,500 for a 500/sf studio,” wrote Caulfield. A comparison of local rental rates shows an average in Tampa of $1,166, and an average rate in St. Petersburg of $1,211, as of June, 2016.
A recent article by Jack Herrick of the Miami Herald reveals that “Despite a decline in rents over the past year, Miami still rates as the most unaffordable city in the U.S…. At a median rent of $1,950, only 6.9 percent of the Miami metro area’s rental properties are considered ‘affordable’ in relationship to income. That’s a drop from 8.8 percent in April of 2015. That’s significantly worse than in New York and San Francisco, where wages are higher. In New York, 19.6 percent can afford the median rent of $2,354; in the Bay City, 22.2 percent can afford the median rent of $3,500,” said Herrick.
How is a developer supposed to make a return on his money if the cost of land, infrastructure, utility connections, taxes, and municipal fees drive the cost of construction beyond what the local renter can bear to pay out of their monthly net income? Minimum salaries of $15/hour are only half of what it takes to live in an apartment at $1,300/month. So, what kind of apartment can you rent for $650/month if you make $15/hour? This is a basic conversation we need to be having with the design and development community.
Does it take less energy and cost to re-develop an existing property and rehabilitate it into more affordable housing? I say it does considering the cost to develop raw land. Finding the existing property in the right demographic location to serve the population needing the housing is the challenge. Then the conversation turns to transportation and the lack of mass transit. If I can’t afford my housing how can I add car ownership on top of that? I need to reach my job in order to pay my rent.
Urban living is growing because of transportation availability in those cities that provide options. Let’s continue this conversation by hearing your experience and solutions. This concern is growing and as a design/development community, we need to try and solve it as soon as practicable.