Most of the country’s new apartments are going up right here in Houston

Low Cost Housing Project

Rents in Houston have been rising — alarmingly — for a while, but there might be some relief on the horizon. Of the more than 320,000 new apartments in the U.S. slated to reach completion this year, RentCafe reports that Texas can lay claim to about 70,000 of them.

That’s 22 percent of the national inventory, spread out over Texas’ four biggest metros of Houston, Dallas-Fort Worth, Austin, and San Antonio.

Houston alone is gaining 25,935 units, which is seconded by DFW’s 23,159 units. Filling out the top five are some heavy real estate hitters: New York, Los Angeles, and Washington.

Sixth-place finisher Austin is constructing 13,568 units, while San Antonio is putting out the welcome mat for 7,158 units.

This 50 percent increase in apartment construction should signal a cool-down in most big cities from the recently overheated pricing. Cuts in Houston’s energy and mining industries have furthered this reprieve, resulting in a 3.4 percent rise in rent this year.

Of these new apartments, expect more than half of them to be one-bedroom units.

Source: By Lindsey Wilson

HOUSTON: Affordable Home

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Many successful cities—most notably, London and San Francisco—have a glitch in their operating systems: Though they are growing rapidly, too many people are finding they can’t afford to live there.

Not Houston. From 2010 to 2014, the Texas city added more than 140,000 people, a 6.7% increase and second only to New York in the U.S. But the difference between Houston and other high-growth cities is that it has expanded its housing stock to accommodate its new residents. In roughly the same period, the Houston metro area issued construction permits for 189,634 new units, the most in the nation. It is not surprising, then, that more than 60% of homes in the larger Houston metro area are considered affordable for median-income families, according to the National Home Builders Association, compared with about 15% in the Los Angeles area.

Houston has “shown a capacity to grow without the kind of massive real-estate inflation that makes settling into places like New York, San Francisco, Boston, as well as London, all but impossible for middle-class families,” says Joel Kotkin, a fellow in urban studies at Chapman University in Orange, Calif., and executive director of the Houston-based Center for Opportunity Urbanism.

No zoning makes it easier and faster to build, especially in response to changing economic conditions. A developer can avoid a lengthy and expensive rezoning process to build a townhome complex in a declining neighborhood of aging single-family homes. It might have to upgrade sewer lines and streets, but development costs are still low compared with other places. Although prices have risen some as builders replace older homes with nicer housing, the city stays affordable because so many new homes can quickly come on the market to keep up with demand.

The lack of zoning “actually does give the developer and design communities the ability to do things unlike anywhere else,” says Tim Cisneros, a Houston architect.

Says Mr. Kotkin: “While many on the ocean coasts yearn to restore the 19th-century city, the Texas cities are creating a template for this century.”


The multifamily scope is good in Houston

Low Cost Housing Project

In its Winter 2016 Multifamily Perspective report, JLL Research identifies three factors that could drive multifamily development in suburban markets.

While cautiously bullish for 2016, investor appetites for new product remains strong overall. Factors that are continuing to drive multifamily investment include constrained housing starts, strong leasing performance and demand shifts in demography, namely the impact of millennials. The vast majority of multifamily development has been focused in Central Business Districts (CBD’s), growing at nearly four times that of suburban markets. However, the delivery of more and more Class A product in CBD’s begs the question of developers: Where to next?

Top 3 factors driving suburban resurgence

To answer this question, JLL Research took a closer look at suburban multifamily markets to identify three factors that are likely to impel suburban multifamily development.

  1. Suburban demographics – It’s all about jobs. Absorption trends currently demonstrate that the demography, economy and housing landscape of Sunbelt markets, like that of Texas, remain favorable. Furthermore, employment gains in these as well as Western Tech markets are strong.
  2. Affordability – The second driver of potential suburban development is affordability. Due to strong market fundamentals, multifamily rents have increased at a faster pace in 2015 than at any point in the last eight years. However, marginal wage growth, constrained single-family housing development, and increasing single-family housing prices have reinforced the relative attractiveness of renting.
  3. Public transit – As a significant driver for multifamily development in suburban markets. Product proximate to public transit is key for markets with dynamic or emerging urban cores or employment nodes with strong intra-market public transit infrastructure. While not applicable in every U.S. market, the accessibility of transit is a crucial consideration for some investors to identify property-level advantages that attract and retain residents.

This being said, suburban markets have not been entirely ignored by multifamily developers up to this point. In fact, relative to urban market counterparts, the pricing gap between urban and suburban rents has tightened. This trend has been observed across Houston’s west and northwest submarkets, and increasingly on the east side.

For 2016, however, suburban multifamily development is still well-positioned to benefit from the impacts of shifts in demography, looming affordability concerns, and expanding public transit.

Source: By: Greg Austin, JLL Houston.