These Are the U.S. Cities Where It Costs Too Much to Build
The U.S. needs more new housing.
Existing homes are in short supply for both buyers and renters, from bustling coastal metropolises to smaller inland cities. Home seekers are bidding up prices and historically low ownership rates mean more people are renting, triggering fierce competition for leases. There are signs that rent growth is slowing—it’s just not slowing quickly enough.
A new report published by the National Multifamily Housing Council and the National Apartment Association—two trade groups for landlords—seeks to quantify just how much rental housing is really needed in cities across the U.S.—as well as how difficult it is for real estate developers to actually deliver.
The first chart seeks to quantify the demand part of the equation. It looks across metropolitan areas, estimating future homeownership rates, household formation, demand for second homes, and attrition of older units—among other factors.
Here’s some past and prologue: Between 2000 and 2015, New York has added 212,000 rental units in buildings that have at least five units, according to the report. While less than what the city needs between now and 2030, it’s at least in the ballpark. Dallas, however, has built 144,000 such units over the same period. This means, given the above chart, the metro will have to almost double the pace of construction to meet estimated demand.
The good news, such as it is, is that there’s not a lot of overlap between the cities with the most overall demand and the ones shown in the second chart, which combines measures of zoning regulation and availability of buildable land. In this way, it ranks where regulation and land costs are the most challenging to developers.
The bad news for cities on this chart is that rent is expensive all over. In seven out of 10 cities where it’s hardest to build, more than two-fifths of renters spend at least 35 percent of their income on rent. The worst on that count is Miami, where 54 percent of renter households spend more than one-third of their income to pay for housing.
Big apartment buildings aren’t the only type of housing stock that’s in high demand. The U.S. needs more small apartments, and more single-family houses, too, especially in West Coast cities that have seen rapid job growth but only a modest supply of new homes for sale.