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No Relief in Sight for Higher Rents
“The Rent is Too Damn High — and It’s Going to Stay That Way,” reads a title in Reason Magazine’s August-September 2019 issue. There is no disputing that multifamily rents are high, and the percentage of renters nationwide who are cost-burdened continues to grow. Apartment List noted that the percentage of cost-burdened renters rose from 24% in 1960 to 49% in 2014.
According to research fellow Emily Hamilton with George Mason University’s Mercatus Center, however, the scenario isn’t necessarily “nationwide,” as much as it’s being driven by land-use regulations in expensive markets. This, in turn, makes it “nearly impossible to add enough to the housing supply to accommodate the number of people who would like to live there,” she said.
Furthermore, while experts suggest that cities should add one unit of new housing for every two new jobs created, this isn’t happening in the active job-creation metros. In San Francisco, 6.8 jobs have been added for every new housing permit issued between 2000 and 2015. In New York, it’s three jobs per permit, while Los Angeles’ ratio is 4.7 jobs for each housing permit.
Why is this happening? The Reason article points out that cities make it difficult and expensive to add additional units, by implementing restrictive zoning codes that limit how much new housing can be built. On top of this, developers are subject to lengthy approval processes, which widens the timeline on getting the appropriate number of units to market.
In San Francisco, for example, developers spend years and millions of dollars getting permission to build. An apartment building larger than 10 units requires, on average, more than six years to build. Nearly four of those years are spent obtaining the necessary permits, and then going toe-to-toe with the local NIMBYs.
“For each project that’s delayed,” the Reason article pointed out, “an unknown number of developers are deterred altogether.” This leads to constrained housing supply, meaning the housing that’s available continues to be more expensive, especially in urban areas.
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