NAA Study: Barriers To Affordable Apartment Housing In Many Cities

Barriers to affordable apartment housing  mean developers cannot get new units off the ground in many cities according to a new National Apartment Association study.

By John R. Triplett

Rental Housing Journal

The challenges developers face in trying to build affordable housing apartments is the focus of the study by the National Apartment Association (NAA), using four key cities as pilot projects.

While developers know the roadblocks they hit in trying to build affordable apartment housing, local city planning officials and city government officials are also aware of the problem, said Paula Munger, Director of Industry Research and Analysis for the NAA, in an interview.

The pilot cities study came from research showing a need for 4.6 million new apartments by 2030.

A few highlights from the barriers to affordable apartment housing study:

    • The cost of construction, including land costs and fees, are the most common factor affecting new development.
    • Of the four cities in the pilot – San Diego, New York City, Austin and Miami –  San Diego has the greatest number of restrictions, from land availability to community involvement.
    • New York has high construction costs and land availability issues, plus the highest multifamily property tax in the country.
    • Miami has land availability issues due to being on the water.
    • Austin has rising construction, land, labor and impact fees.

“We commissioned a group called Hoyt Advisory Services to look at future demand for apartments,” Munger said.

Munger was referring to a report that “paints a dire picture of apartment availability between now and 2030.”  According to the report, the U.S. housing market will need 4.6 million new apartment homes at all price points by 2030.’s Erika Morphy writes that the “apartment industry is quickly exceeding capacity.” Overall, nearly 39 million people live in apartments.

She said “an offshoot of that study was looking at the correlation between affordability and difficulty building new multifamily apartments. The Hoyt group looked at an old (2007) land use index that the University Of Pennsylvania Wharton School Of Business put out and ranked 50 metro areas according to how difficult it was to build. They did a little bit of updating.

“Then we decided to expand upon that, because the Wharton Index was over 10 years old. These four markets are the beginning of that expansive research.

“This is a 70-question survey. It’s pretty intensive, asks about how long it takes to get things approved, how much costs have changed over time, etc., etc. We wanted to dig into it some more because we know its impact. The more difficult it is to build, you can’t meet the demand for apartments. That’s what causes the affordability issues,” Munger said.

Why were these four markets chosen?

“One, we wanted a good geographical dispersion. We have New York, Miami on the East Coast, we have Austin in the middle, and San Diego on the West Coast, different-sized markets.

“We do have these rankings of the 50 metro areas that are mostly based on this 2007 index with some updates. New York, Miami, and San Diego were showing up as difficult to build in with a lot of barriers. Austin was not. Clearly the markets where it was difficult, we wanted to expand upon. We also wanted to look at one, Austin, where it wasn’t so difficult, relatively speaking of course. We chose Austin for that just so the research team could see how the survey performed with both spectrums,” Munger said.

Seattle in top 10 of cities with barriers to affordable apartment housing

In addition to the four cities used in the pilot study, the NAA has the rankings of the top cities where it is most difficult to build affordable apartment housing.

“Certainly Seattle is in the top 10 most difficult to build from the research that hasn’t yet been updated, and Portland is down around 20,” Munger said.

What action can the NAA take?

“We can try to make recommendations to policy leaders and legislators,” Munger said.

“The one-page reports on those four markets are geared towards that, geared to really bringing the problem to light:

    • These are the barriers.
    • This is why we can’t build.
    • This is why we don’t have enough supply to meet the demand.

“We can make policy recommendations. If you go to our website,, and we have a document. It’s called Vision 2030. There are some policy recommendations in there.

“We do advocate on behalf of the industry, and affordability is part of that in issues such as  outdated zoning laws; we also advocate for “by-right” development, expedited approval for affordable housing, and density bonuses. Those are just a few issues our Government Affairs team is focused on, as well as the other recommendations in Vision 2030.

Construction costs a problem in all markets

“Construction cost showed up as being a problem in all of the markets, rising construction cost in particular. Land cost, and fees, and labor,” Munger said.

She said NAA will be starting the second phase of the project in the next couple of weeks and “we’ll roll out the survey on a national basis.

“Depending on where we get a statistically significant number of responses, those will be the next few markets to be released. I don’t really have a list of what’s upcoming. They’ll self-select themselves based on responses,” Munger said.

Barriers to affordable apartment housing summary

It was important that this study be balanced between apartment developers in the private sector and those in the public sector, Munger said.

“We ended up getting about two-thirds private and a third public. I think when you dig into the public sector responses, there’s certainly a variance between public and private in terms of their perception of the process.

“But I was also surprised that there’s plenty of folks in city planning and city government that know that the approval process is complex. They know that it can take so long. Nimbyism (not in my back yard) showed up in 70 percent of the public responses as being one of their top three problems.

“I guess just the point being that both sides are recognizing that this is an issue, and that’s a very good thing. Hopefully that means we can make some headway going forward,” Munger said.

Munger and the NAA hope that by exploring problems in apartment construction in various cities, more people will understand why costs rise and rents increase – and what has to be done to help ease the situation.

“I’m hoping that (it) helps when people see that these are barriers. Different cities have differing degrees of these barriers, but they’re all common in that they exist and that they impact the supply.

“The other thing to remember too is that it just varies widely state-to-state, jurisdiction- to-jurisdiction, sometimes even within the same metro area,” Munger said.

Here is some more detail from each of the cities in the report

Austin has environmental restrictions plus rising land and construction costs.

NAA Study: Barriers To Affordable Apartment Housing In Many Cities

This high growth market ranks 6 of 50 metro markets for forecasted growth through 2030.

Given the high demand, the market is facing significantly rising construction, land and labor costs. Larger developments can more easily absorb impact fees, creating concern as to the financial feasibility of smaller-scale apartments.

The market is significantly impacted by protective environmental standards which are frequently stated as a costly and time consuming process issue. Building codes are under review with revisions expected later this year. Respondents particularly rank influence of local councils and local residents, namely citizen opposition to growth as strong influencers on residential building activity, which creates a more complicated structure and entitlement process and often requires a real estate advocate and/or community relations specialist to assist the development team.

As one of the fastest growing renter population bases, this market has a relatively new rental stock with only 21% of apartment units built before 1980 and only 17% of rental housing stock in STAR units, the lowest share of older, readily affordable rentals in 50 national metros previously surveyed.

Miami land availability and environmental restrictions

NAA Study: Barriers To Affordable Apartment Housing In Many Cities

As is typical for coastal markets, land in Miami is constrained by natural barriers.

The metro scores high in the number of conservation bonds passed in the past ten years and survey respondents rate the impact of environmental restrictions and their mitigation as important factors in regulating and impacting new apartment development, particularly near the coast.

Land availability ranks the highest barrier, followed by the environments issues above, land and construction costs. Costs are particularly affected by impact fees and waivers are generally not available in lieu of fees. Community involvement remains a significant barrier. Here, survey respondents note that community meetings and engagement are a requirement before the presentation of any zoning or rezoning application.

Local council is rated the strongest in terms of organizations that influence apartment building activity. Miami political structure was ranked the fifth most significant barrier, a nod to the vagaries of metro politics, followed by infrastructure and density and/or growth issues amid a rising demand for more upscale and affordable rental units. Those rental households paying more than 35% of income on rent is the highest share in 50 national metros previously surveyed.

New York City has land availability issues and costs

Not unexpectedly, construction and land costs as well as general land availability were rated as the top factors influencing the new apartment market in New York City.

NAA Study: Barriers To Affordable Apartment Housing In Many Cities

The city also has the highest multifamily property tax rate in the country with complex rent control laws, and can have lengthy submission and appeal processes for housing developers. Respondents then listed affordable housing requirements and the entitlement process as restrictive, followed by community involvement. Community meetings before zoning requests was a particularly significant influence.

The complexity of the NYC urban market is particularly extreme when compared to other metros in the number of submissions and percent of projects that require property tax or other public subsidies. Also, environmental restrictions have significant impact on new apartments. Interestingly, less significant factors include infra-structure and political structure, particularly involvement of county and state level legislative and approval processes versus City actions.

San Diego land availability and environmental restrictions

NAA Study: Barriers To Affordable Apartment Housing In Many Cities

A highly desirable, land-constrained market, San Diego metro has multiple factors ranked high for their impact on apartment development.

Respondents particularly noted that citizen opposition to growth influences the development process through an array of advocacy groups, public votes to circumvent council or planning commissions, repeated lawsuits, and numerous community meetings required before zoning or rezoning. Construction costs are driven up by the high number of impact fees, lack of waivers or processes to mediate fees, and high and increasing land costs.

In addition to coastal restrictions, environmental restrictions and mitigation, the area ranks high in the number of conservation bonds passed at the local and state level in the past ten years including the California Environmental Quality Act (CEQA).

Metro experts also noted process and political structure issues that create uncertainty and delays in the entitlement process. Complex approval structures requiring multiple submissions to approve developments are frequently cited. More than most metro markets, these top issues present formidable barriers to new apartment supply amid strong demand ahead.


National Apartment Association

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U.S. Apartment Demand – A Forward Look

The Country Needs 4.6 Million New Apartments By 2030. How Many Are Needed Near You?