SAN FRANCISCO—With concerns in the air about overbuilding in some markets, the flip side is undersupply, which may be considerably more widespread. A new report from Apartment List says that only 10 of the nation's 50 largest metro areas have produced enough new housing to keep pace with job growth in recent years.
The report by senior growth associate Chris Salviati sees the demand/supply gap as particularly acute in many of the nation's largest cities, including San Francisco, Boston and New York City. “As the most desirable jobs cluster in these metros, restrictive zoning and bureaucratic hurdles slow the pace of new construction,” Salviati writes. “With supply failing to increase in line with demand, rents have been increasing to levels that are only affordable to those with the highest-paying jobs.”
Nationally, the number of households grew by 11.2 million over a 10-year period, while just 9.9 million housing units were added during the same time period. Since that 10-year period, 2005 to 2015, includes a recession as well as its recovery, the gap becomes even wider when looking at a more recent time frame.
In order to keep pace with demand, a city should add one new unit for every one to two new jobs, Apartment List says. While many metro areas maintained this pace over the 10-year period, but in the post-recession era, new construction hasn't kept pace as jobs have rebounded.
Even many of the areas that saw significant job losses during the recession haven't been producing enough new housing during the recovery, according to Apartment List. Detroit, for example, lost 15% of its jobs during the downturn, but in more recent years has added seven jobs for every new unit permitted.
In many metro areas, in many metros, jobs growth tends to be centered in the county containing the core city, while the surrounding suburbs see a greater share of new housing supply, the report states. The result is heightened levels of undersupply in the core cities along with extended commutes for residents who are forced to extend their housing search to outlying suburbs.
“Cities that add jobs without also increasing their housing stocks quickly become unaffordable for all but the most well-off residents,” Saviati writes. “As demand for housing continues to rise, supply must respond accordingly, or the current affordability crisis being experienced in many parts of the country will only be exacerbated.” Click here for the complete report.
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
