National Apartment Association Survey Shines Light on Affordable Rental Housing Barriers at HUD Stakeholder Meeting

Published by Peter Lawrence on Monday, September 9, 2019 - 12:00am

The need for affordable rental housing nationwide is obvious.

However, the cause of this shortfall is multifaceted.

A recent survey and accompanying report produced by the National Apartment Association (NAA) provides more insight into some of those factors by examining what is preventing multifamily housing–both market-rate and affordable–from being built. The report, “Barriers to Apartment Construction Index,” analyzes results from a national survey and ranks cities (individual city reports are also available) based on how easy it is to develop multifamily housing. This report was highlighted at a recent U.S. Department of Housing and Urban Development stakeholders meeting in Washington, D.C.

The survey includes 883 respondents, ranging from government entities to private developers. The respondents were well-versed in the housing market, as 75 percent of respondents have more than 10 years of experience developing or reviewing developments in the market.

The survey included 91 questions and five external data points that were then aggregated into 10 different factors to measure development complexity in each metropolitan or micropolitan statistical areas surveyed, including:

“Community involvement” is a factor that encompasses citizens’ opposition to structures and growth (often called NIMBYism), as well as the political power of citizens in the development process.

“Construction costs” is a factor that encompasses impact fees, hard and soft costs, land costs, and union wages that increase construction costs, as well as increases in those costs over the past five years.

“Tenant and affordable housing requirements” is the presence of affordability efforts at the metro market level. Questions of presence and specifics of rent control, as well as density bonuses are included.

“Infrastructure” surrounds the importance of certain factors in regulating the rate of residential development encompassing impact fees, school crowding and under crowding and city budget constraints.

“Density and growth restrictions” factor includes restrictions that are used to limit the volume or density of construction in a market, such as parking requirements and unit size maximums. “Land supply” refers to the land supply index found here.

“Environmental restrictions” refers to the importance of environmental restrictions in the regulation of residential development. This includes wetlands, water availability and flood zone restrictions.

“Process complexity” refers to questions regarding how long the approval process takes, how many submissions are required and zoning regulation.

“Political complexity” measures the number of layers of approvals at the local, county and state levels, as well as influence of local residents and environmental or design review boards. Approval processes that require multiple submissions and layers of approval tend to take longer to approve and increase construction costs.

“Time to develop” includes questions regarding the time it takes for both small and large projects for land development approvals and to zone, receive building permits, and address nonconforming projects. In addition is questions regarding if the time to develop has increased in the past years.

Three Key Findings: NIMBYism, Construction Costs & Regulation

One of the top two factors that respondents felt influenced multifamily housing construction the most was community involvement. The strong response from the survey lead NAA to conclude that NIMBYism often stops community growth and slows the rate of multifamily residential development across the majority of metropolitan areas.

The next factor influencing multifamily construction was construction costs. Nearly half of the survey’s respondents indicated that over the past five years, construction costs have gone up by 11 to 20 percent, which stays on trend with the rising construction costs cited in the State of the Nation's Housing 2019 report.  

The last key finding was that housing affordability issues correlates with the complexity of the housing construction approval processes. This indicates that the more heavily regulated and complicated the construction process is for housing, the less affordable the multifamily rental market becomes. According to the survey, 40 percent of respondents reported that it is “fairly to extremely difficult” to get approval for new multifamily residential developments. Regulatory barriers serving as additional costs to multifamily construction has also been cited by other surveys, such as the recent Harvard Joint Center’s Home Builder Perspective on Housing Affordability and Construction Innovation. This working paper cites 75 percent of multifamily builders rate the permitting/development approval process as a top concern for construction.

Of course, correlation does not equate to causation, but this correlation does echo the sentiment that certain deregulation measures would be helpful in minimizing the affordable housing crisis.

Implications of the Survey on Affordable Housing

Although NAA’s survey was created with the intent to explore the supply side of the market-rate multifamily housing market, many of its findings lie in similar veins to the affordable housing market. NIMBYism, complex building requirements and high construction costs are all factors hindering the affordable housing market. However, this is not an argument that eliminating these factors will be enough to provide housing for low-income renters. For starters, some types of regulation work to protect the quality of life and health of renters and should be maintained. Additionally, even if deregulation is achieved and NIMBYism fades, low-income renters will still need public subsidies. This is because the private market will never be able to supply housing at low enough rents that all low-income households can afford.

This NAA report also strengthens the argument for the Affordable Housing Credit Improvement Act of 2019 (AHCIA). The act would provide more resources for affordable rental housing development; increase the financial feasibility of developments; or otherwise streamline and simplify the Low-Income Housing Tax Credit program. Some of the AHCIA provisions would address the barriers referenced in the report. One such provision includes a feature that would combat NIMBYism. This feature would remove the requirement to notify the jurisdiction’s chief executive officer. While this current requirement is well intentioned, it often results in the consequences of giving local government officials “veto power” over projects. This “veto power” comes from the fact that if locals withhold support, the project may not get funded. Some states have even taken this further by requiring developers to demonstrate local support for Housing Credit developments. Removing this requirement would be a way to combat NIMBYism, and would allow more affordable homes to be built. Another feature of the provision is the prevention of QAP selection criteria from any support or opposition to a development from local or elected officials or local government contributions to a development. Under AHCIA, states would be able to develop a competitive scoring process that encourages developers to obtain additional funding sources for their developments, including local financial contributions, as long as states do not prioritize local contributions over any other source of outside funding. This provision would enable more developments to receive LIHTC allocations. These changes will encourage developers to participate in the program to create the much needed affordable rental housing for many low-income communities.