WASHINGTON, DC—Not only has an improving economy boosted the apartment sector as household formation has rebounded to pre-recession levels. It turns out that the sector has helped improve the economy.
Research commissioned by the National Multifamily Housing Council and the National Apartment Association shows that the apartment industry and its 36 million residents contributed $1.3 trillion to the Us economy in 2013, supporting 12.3 million jobs in the process. The data cover the economic contribution of apartment construction, operations and resident spending on a national level, along with drilling down into all 50 states and the District of Columbia. Complete study results are available at the study’s website, WeAreApartments.org.
Not the largest segment of this contribution but certainly the most visible, apartment construction pumped $92.6 billion into the economy during the study year. In the process, it generated $30 billion in wages for 702,000 workers, according to the study, based on research by economistStephen S. Fuller.
“Our study showed major increases around apartment construction, with spending, economic contributions and personal earnings from construction all rising substantially,” says Fuller, director of George Mason University’s Center for Regional Analysis. “The construction for multifamily apartment buildings is a significant and growing source of economic activity, jobs and personal earnings in communities nationwide.”
Construction has been steadily increasing over the past few years. During the depths of the recession in 2009, work was launched on just 97,000 units, the lowest level on record. In ’13, that figure had more than tripled to 294,000 apartment starts.
However, NMHC chairman Daryl Carter says that pace still falls short. “We need 300,000 to 400,000 new apartments each year just to keep up with resident demand, yet we’ve chronically under-built for years during and after the Great Recession,” says Carter, CEO of Irvine, CA-basedAvanath Capital Management. In ’13, for example, the industry completed 186,000 units, “which is only about half of what was needed to meet resident demand for that year alone.”
Although apartment starts have ramped back up since ‘09 “almost to the point of meeting annual demand, “ Carter points out that the lengthy development process, coupled with “years of backlog,” mean that “completions aren’t likely to hit the necessary level for a couple of years. This increase of available apartments will also help address affordability challenges that we see in many markets across the US.”
As an indicator of how much demand exists for the product that’s available now, RentPath’s network of sites registered a 24% year-over-year increase in unique visitors during January, normally a slow month. Additionally, the Atlanta-based digital media company, whose sites include Apartment Guide, Rent.com and Rentals.com set a new one-day record for lead delivery earlier this month, with 148,000 advertiser leads delivered on March 2.
“It’s no secret that the apartment market has been and continues to be hot with continued occupancy growth despite newly constructed apartment homes coming on line at a rapid pace,” says Scott Asher, VP of marketing and operations for RentPath. “But the fact that more consumers are searching for apartment homes during January of 2015 than during the peak leasing months in the past is a really good sign that the demand for apartment housing is on the rise.”