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Why Affordable Apartments Are Hard for Low-Income Renters to Find

Why Affordable Apartments Are Hard for Low-Income Renters to Find Multi-Housing News (04/30/17)

Fannie Mae's Multifamily Market Commentary for March expects nearly 404,000 apartments to come online this year -- an increase from approximately 343,000 deliveries in 2016. However, only a handful of metro areas account for a disproportionate share of the nationwide total. Last year, Boston, Los Angeles, New York City, San Francisco, and the District of Columbia combined accounted for about 79,000 of the total apartment deliveries. For 2017, they are projected to have around 81,000 deliveries. These major gateway markets tend to be more expensive than other parts of the nation. In them, much of the construction is indeed occurring in the high-rent, Class A tier.

Meanwhile, the cost of construction for all types of apartment buildings has increased every year for the last four years. This year, the story is the same as RSMeans estimates the cost of constructing a building with eight to 24 stories will average $34 million -- or about a 20 percent increase in only a few years. The top metros for new apartment construction tend to have higher construction costs than the country as a whole. In 2016, for instance costs for eight- to 24-story buildings averaged $41.4 million in New York City, followed by San Francisco ($38.8 million) and Boston ($37.6 million). Among the leading gateway markets, only Washington, D.C., ($31.2 million) fell below the national average.