HOUSTON — A widening gap between average wages and the cost of a home will perpetuate a rental boom nationwide, even as forces are suppressing some multifamily construction.
Demand for new multifamily residences has come from a rising number of household formations, young people choosing to rent rather than buy, baby boomer downsizing and population growth in states including Florida.
The trend has been especially prevalent in Southwest Florida, where developers have proposed or are building nearly a dozen new multifamily complexes from Parrish to Punta Gorda.
But because land and labor costs are rising and financing remains elusive, multifamily development is likely to be only sporadic after 2016, a panel of experts said Wednesday.
That means a growing shortage of rentals will continue, and rents for apartments and other residences will head upward
“This has happened very, very quickly,” said Martin Fein, a Houston-based multifamily developer. “You have a lot of projects coming online this year and next, but virtually no projects are scheduled after that.”
Nationwide, building permits for multifamily projects in April rose 22 percent from March. Multifamily housing starts have steadily increased since 2010 to match levels from the mid-2000s, according to the U.S. Census Bureau.
Even so, experts attending a national real estate conference say there’s enough demand to absorb 300,000 units annually through 2019.
Regionally, multifamily projects are slated for Lakewood Ranch, downtown Sarasota and northern Manatee County.
In Sarasota, attorney and real estate investor John Meshad has begun work on the first new downtown apartment building in nearly a decade. His development includes 141 rentals and a 139-room hotel.
Software entrepreneur Jesse Biter is also finalizing plans for roughly 200 apartments downtown.
In Lakewood Ranch, developers are building a 280-unit apartment complex at Pope Road near State Road 70. And Davis Development of Atlanta is moving forward on the 237-unit Venue at Lakewood Ranch nearby.
But many renters will continue to feel squeezed.
Most of the new-construction market “ is higher-end luxury apartments,” said Mark Obrinsky, chief economist for the National Multifamily Housing Council. The only “affordable housing for median income is ‘Class A’ from 20 years ago.”
Rental demand is typically driven by household formations increases or increases in foreclosures, which bruise families’ credit and leave them unable to buy again for years.
But now, more young professionals are renting for flexibility and to avoid the commitment — and potential pitfalls — of homeownership.
“For those people, it doesn’t make sense to plunk down a big down payment on a 30-year mortgage,” Obrinsky said.
More renters also are choosing areas like Lakewood Ranch or downtown Sarasota for amenities, and because they can often walk or cycle to work and shopping venues.
Some analysts fear the trend could ultimately weaken single-family home purchases for years to come.
“We’re seeing more renters by choice,” said Joseph Greenblatt, president and CEO of Sunrise Management, which owns 13,000 residential units nationwide. “They’re choosing to rent for flexibility.”
