According to those responding to the NMHC's quarterly survey, high land costs are the primary obstacle to expanding the supply of moderate-income housing. High land costs translate into rent levels unaffordable by middle-class tenants, according to the NMHC. Almost two-thirds of survey respondents, who include CEOs and apartment firm executives who serve on NMHC's board of directors and advisory committee, said moderate-income apartments only make economic sense in locations farther away from downtown urban centers and/or employment areas, where land is less expensive.

Another 20% said even where moderate-income apartments are economically feasible, zoning restrictions and neighborhood opposition make them virtually impossible to develop. According to the NMHC, only 5% considered moderate-income apartments feasible in a wide variety of locations.

The survey also showed signs that the economy's sluggishness is impacting the apartment industry. The NMHC's Market Tightness Index dropped from 47 in January to 30--a score below 50 means there are more markets in which rent increases are slowing and vacancy rates are moving up than those in which the conditions are tightening).

"Although apartment markets have held up better than many parts of the economy, the sharp slowdown is clearly having some impact," notes NMHC's chief economist Mark Obrinsky. "In 'supply constrained' markets where new apartment construction has not been able to keep up with the demand for rental units in recent years a modest slackening of demand may move them closer to equilibrium. In other markets, we expect to see new construction adjusting quickly to any reduction in demand."

The survey shows that despite the slowdown, sales volume has held up in many markets. Some 20% noted more deals than in the prior three months, while 33% indicated deal volume had slowed--the rest of the respondents reported no change. The NMHC's Sales Volume Index jumped to 43, over last year's first quarter level of 37.

A Sales Volume Index reading below 50 indicates that, on balance, sales volume is decreasing. According to the NHMC, the availability and cost of debt financing continues to improve, although at a slightly lower pace than in the fourth quarter of 2000. The group's Debt Financing Index reading came in at 77, down 90 in the prior quarter.

Based in Washington, DC the NMHC represents the nation's leading firms participating in all aspects of the apartment industry.