This story was originally published in Multifamily Executive.
Old multifamily buildings and the preservation of affordability have an important connection, according to a new Apartment List Rentonomics report. As multifamily buildings age, initial construction costs are paid off and this type of unit becomes less desirable due to normal wear and tear. As a result, these older units command lower rents and serve as a source of market-rate affordable housing through a process known as filtering, for low-income and middle-class renters.
However, economists explain, the filtering process relies on a supply of units of various ages, and a lack of new construction will result in unfiltered dwellings. With the share of newer rental buildings falling and the share of older rental units growing, demand will remain high for older buildings and prevent their rents from falling.
“As cities across the U.S. debate ways to improve affordability, it is crucial to understand the important role that aging buildings play in providing a source of market-rate affordable housing for those who do not qualify for subsidized options,” the report states.
As of 2016, roughly 66% of rental units were more than 30 years old, the highest share since the Census began tracking this data in 1960 and up from 41% in 1980. On the other hand, rental units less than 10 years old have fallen, from 24% in 1980 to 9% currently. It’s the lowest share going back to the 1960s and one-third the level of its 1980 peak.
The trend was observed in all of the nation’s 25 largest metros, but especially in the Sun Belt, where nine cities have seen increases of more than 20 percentage points since 2000.
Median rent in 2000 for properties built prior to 1960 was $792, compared with $1,022 for properties built in the 1990s. While that gap might not seem significant, it has gotten smaller in recent years as rents have increased in older buildings. From 2000 to 2016, median rent for units built between 1990 to 1999 increased 6.5%, while rents for units built before 1960 increased by 21.4%.
The study also notes that the filtering trend isn't guaranteed. “It is important to note that as buildings age, they become ripe for remodeling or redevelopment,” it states. As more older properties are remodeled, as opposed to built new, rents will remain competitive and affordability will quickly grow more expensive.
This story was originally published in Multifamily Executive.
