[Source: NAHB Press Release, January 20, 2009]
The current turmoil in the capital markets is jeopardizing quality rental housing across the country, including the development of much-needed affordable apartments financed with Low Income Housing Tax Credits (LIHTC), according to multifamily apartment owners and developers, speaking at the National Association of Home Builders' (NAHB) International Builders' Show being held here this week.
"Despite a demand for our product that far exceeds the supply, affordable apartment developers are finding it nearly impossible to assemble the necessary capital to move forward with their projects," said Robert Greer, president of Michaels Development Co, in Marlton, NJ. Greer, whose company has built more than 40,000 LIHTC units over the past 30 years. "Putting together deals that make sense is more difficult now than it has ever been-- primarily because the program's biggest investors of the past--Freddie Mac, Fannie Mae, and large banks--have been sidelined."
Tight financing conditions are also having a profound impact on market-rate rental communities, which are already under pressure from the excessive inventory of unsold single family homes and condos on the market, as well as the dramatic job losses rippling through the economy.
Bernard Markstein, NAHB's staff vice president of Forecasting and Analysis, said that if frozen credit markets don't start to thaw, or the job losses continue to accelerate, NAHB could ratchet down its forecast for multifamily housing starts even further. "Right now, we are forecasting 188,000 multifamily starts in 2009," he said, down more than 100,000 units from 2008.
In spite of the current housing glut, this is a worrisome trend for the multifamily sector, according to Markstein, because starts have hovered between 250,000 and 350,000 for more than a decade. "The stability in the starts over such an extended time indicates that it is a sustainable level of development," said Markstein. "You can argue that the product mix between condos and rentals got skewed during the housing boom, but you can't say that there was overbuilding in the multifamily sector," said Markstein. "Given long-term population and job growth, the need for future rental and condo units would support a return to previous production levels."
"Multifamily projects take longer to design and build than single-family homes, so it's important to have a development pipeline," noted multifamily builder Steve Lawson, president of The Lawson Companies, Virginia Beach, Va. "In the next few years, the huge Generation Y age cohort - people now in their early 20s - will begin entering the housing market, and they won't be able to find apartments."
|