By Meghan Hall
As the U.S. economy continues to plough ahead, with employment growth remaining steady and demand for multifamily product on the rise, the apartment industry has become a vibrant sector in its own right. A new Hoyt Advisory Study study produced in the fall of 2019 by the National Multifamily Housing Council (NMHC) and the National Apartment Association (NAA) has found that the combined contribution of construction, operations, renovations and resident spending totals about $3.4 trillion annually, or more than $9.3 billion on a daily basis. The number, according to NMHC and NAA is significant, and is expected to rise as economic conditions evolve.
“The multifamily industry is an economic engine powering the economy very significantly at the national, state and local levels,” said NAA President Robert Pinnegar in a statement. “This clearly illustrates the tremendous positive impact our apartments have on the communities they serve.”
On a national level, there are 39.7 million apartment residents in the United States; these residents contribute about $3 trillion to the local economy each year, including just under $351 billion in taxes, resulting in 16 million jobs. Taxes generated from apartment residences, notes the report, are often pivotal in supporting schools, improvements local infrastructure and social services in communities throughout the United States.
Apartment operations add $175.2 billion to the economy, spread over 21.4 million apartment homes. Operations produce about $58 billion in taxes, creating 341,000 jobs. 48 percent of U.S. apartments were also built prior to 1980. The bulk of U.S. apartments were constructed between 1960 and 1999; the four decades produced 58 percent of U.S. housing stock. 23 percent of apartments were built after 2000, while 19 percent of apartments were constructed prior to 1959. Due to this, the renovation and repair of apartments often helps to preserve some of the country’s more affordable units, notes the report, contributing $69 billion to the economy and creating 340,000 jobs.
However, there are large numbers of new apartments coming online; with multifamily construction hitting new highs over the past decade.
“Construction is still moving ahead, as there’s a need for additional apartments in many states,” explained MHMC President Douglas M. Bibby. “And, due to an abundance of aging stock, there’s a growing need for renovations and improvements on existing apartment buildings. Construction and renovation/repair will provide a sizable boost in jobs – and the economy – nationwide, and will continue to be a hefty contribution to the country’s economy for decades.”
Currently, apartment construction contributes $150.1 billion and 752,000 jobs to the national economy. Over the past several years, apartment construction has increased to what the report describes as “unprecedented” demand. There were 349,900 apartment completions in 2017, up from 129,900 in 2011. On average, between 2011 and 2018, the apartment industry averaged about 255,00 annual completions.
Still, the report estimates that roughly 328,000 new apartments are needed annually to keep up with demand. This level of multifamily completions has only been surpassed twice since 1989.
“The apartment industry’s contribution is one that has grown in recent years, fueled by increased rental demand overall as population and employment growth continue and renting becomes a preferred tenure choice for millions of Americans,” added Eileen Marrinan, managing director of Eigen 10 Advisors, which partnered with Hoyt.
The report also took a look at individual metros throughout the United States to gauge their contribution to the national economy. For example, Seattle was found to have 344,500 apartments within its jurisdiction that contributes about $34.4 billion and supports just under 102,000 jobs annually. San Francisco, perceived as often a more expensive and well-established market, has 416,100 apartments. Its apartment industry contributes 195,600 jobs and $65.7 billion to the economy on an annual basis. San Jose, America’s tenth largest city, has just under 155,000 apartments that contribute 55,800 jobs and $24.4 billion to the economy.
Due to their higher concentrations of apartments, as well as development costs and local regulations, NAA and NMHC have classified both San Francisco and Seattle as difficult markets with high barriers for new apartments, constricting, to a certain extent, new multifamily supply. San Jose, by comparison, is considered a moderate entry point for new apartments, along with other metros such as Portland and Sacramento.
Portland has a total of 174,700 apartments with an economic contribution of $32.2 billion, while Sacramento has 132,900 units that produces an even $21 billion annually.
As a result, the U.S. apartment industry continues to be an economic powerhouse, contributing trillions to the economy each year—a trend that is likely to continue among major demographic shifts and economic resiliency.