Apartment Industry Starting to Feel Pinch

WASHINGTON, DC-High land costs, zoning restricts and neighborhood opposition all contribute to the problems developers face in building moderate-income housing, according to the National Multi Housing Council. In addition, the trade organization says the slowing economy is contributing to slightly increased vacancy rates for the first quarter.

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.