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Barriers to Entry: Houston and Lone Star State Have Low Hurdles for New Apartment Development, Study Shows

HOUSTON – (By Dale King) – A new study commissioned by the National Apartment Association and the National Multifamily Housing Council has created a numerical classification that ranks 50 metropolitan areas nationwide on the basis of the ease – or lack of it – for building necessary new multifamily residences.

The “Barriers to Apartment Construction Index” examines and ranks large metro areas according to specific factors involved in the preparation for apartment construction – including local regulations, the amount and type of land available to develop and the community’s effort to attract building contractors.

Based on the ranking system, the major metros in Texas – Houston, Dallas-Fort Worth, Austin and San Antonio – are fairly willing to welcome new apartment projects with open arms.

In fact, Dr. Norm Miller, one of the report’s authors and a professor of real estate at the University of San Diego, said if he were planning to build apartments, he would likely do so in Texas.

“One criterion is the percentage of land that cannot be physically developed due to slope or water,” he said. “In Houston, only 8% of the land is undevelopable; in Austin, 4%; in San Antonio, 3% and 9% in Dallas.

Miller is also a principal of Hoyt Advisory Services of North Palm Beach, Fla., the real estate consulting corporation that developed the ranking system at the behest of NMHC and NAA.

The community ranking arrangement lists Honolulu at a level of 19.5, the most difficult place to build apartments, largely because it is sandwiched among mountains and water, and is on an island. Other tough spots to find appropriate property and navigate the paperwork stream are Boston, Baltimore, Miami and Memphis, says the study.

The classification drops to -5.9, the easiest place to build apartments – in New Orleans. Other communities where the process is easy include Little Rock, Kansas City, Indianapolis and St. Louis.

“While real estate is very project specific, any score above the median of 1.8 means it is harder to add new apartments compared to other metros,” says the report.

Among Lone Star State locations, which are all in minus number, Houston is the easiest for building multifamily units, coming in a -2.5. Currently, 1.3 million residents live in Houston units. Another 214,000 apartments will be needed by 2030 to keep pace with demand. The report says the Bayou City “needs a variety of options” to handle “an aging population, immigration, fewer home purchases, population growth and strain on existing home supply.”

Dallas/Fort Worth and San Antonio both rank at -1.3 and Austin comes in at -1.8. More apartments are needed in all those cities by 2030, says the report: 266,000 in Dallas/Fort Worth; 114,000 in Austin and 54,000 in Austin.

Texas metros, Miller said, are “relatively less politically constrained” than other areas of the nation, and generally offer a faster permitting process.    Environmental controls are usually less restrictive.

The study’s co-author said an even more important figure shows up in the document. “Regardless of where each metro area ranks, the United States needs to build at least 4.6 million new apartments by 2030 to meet the expected increase in demand; otherwise the affordability problems that exist today will only get worse.”

To reach the goal of building 4.6 million apartments in 13 more years, government officials and private developers must come together to take action. “NAA and NMHC are advocating for solutions at all levels of government that will help supply meet demand and reduce the cost of developing apartments.”
For more information on the report, visit www.WeAreApartments.org.

July 27, 2017 Realty News Report Copyright 2017

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