National CRE News In Your Inbox.
Sign up for Connect emails to stay informed with CRE stories that are 150 words or less.
Hunt’s John McAlister: Modular Multifamily, Rental Affordability
Affordability and apartment rents could be considered mutually exclusive terms. In response, multifamily developers are working to reduce rents through cost containment, with one solution being modular – or prefabricated – design and construction. John McAlister, Hunt Real Estate Capital’s Managing Director, Affordable Housing Originations, writes about the need for working-class rental units, and how modular rental housing development is a tool to address the demand.
How wide is the gap between income and housing affordability? McAlister points out that, while rents increased 3% annually from 2001-2015, median household incomes actually decreased 0.1% annually over the same period. Furthermore, while close to 1 million apartment units were delivered from 2013-2017, only 20,000 of that group command lower-cost rents. This is because developers are faced with cost increases in construction materials and labor, meaning Class A units are the only way to recoup the investments.
The good news is prefabricated apartment developments mean a shorter, more efficient time frame when it comes to construction. The proof of off-site construction’s effectiveness can also be found in the bottom line; the prefab practice is shown to shave approximately 20% off development costs. There are, however, hurdles when it comes to relying on modular apartment construction. McAlister notes that perception remains a huge factor when it comes to relying on this type of development for more affordable units.
Pictured: Coliseum Connection, Oakland, CA. Image courtesy of Urban Core LLC
*This story has been updated with Hunt’s new name, Hunt Real Estate Capital
For comments, questions or concerns, please contact Amy Sorter
- ◦Development
