An aging population, international immigration and fewer home purchases are resulting in an increased need for new apartments. The Phoenix metro area is expected to need 150,302 new apartments by 2030 to keep up with local demand, according to a new study commissioned by the National Multifamily Housing Council (NMHC) and the National Apartment Association (NAA). The study found that, nationally, 4.6 million new apartments are needed by 2030. This growth would increase economic activity in Phoenix and across the country.
It’s important to note that locally:
- An average of 3,280 investment-grade units were built annually between 2011 and 2016, according to data from Axiometrics. Phoenix will need to average 10,736 units (5+) per year in the coming years to meet the expected demand.
- The Phoenix metro area will need all types of apartments and at all price points.
- Phoenix will need to increase its existing number of apartments by 38 percent by 2030, and ranks #6 out of 50 metro areas in terms of the percent increase in demand for new apartments by 2030.
- Hoyt estimates that there are currently 406,008 apartments in the Phoenix metro area, with residents that span the age and income spectrum.
- Phoenix apartment developers, owners and managers and their residents contribute $9.9 billion to the local economy annually.
“Nationally and here in Phoenix, we’re experiencing fundamental shifts in our housing dynamics, as more people are moving away from buying houses and choosing apartments instead. Strong economic prospects are bringing many new people to the Phoenix area. In fact, new migrations will soon be more than three times the natural population growth here, and many of these new households will choose the convenience of renting. New renters will come from all age groups with strong incomes, though 40 percent of all renter households now pay more than 35 percent of their income on rent,” said Tom Simplot, President/CEO, Arizona Multihousing Association. “We will need to build new apartments to meet the expected increase in demand in our metro area, though there are concerns that local restrictions may make that difficult. This new construction would also boost our local economy in the coming years.”
The increased demand for apartments is due in large part to:
- The aging population. People 65-plus will account for a large part of population growth going forward across all states. The research shows older renters are helping to drive future apartment demand.
- Delayed house purchases. Life events such as marriage and children are the largest drivers of home ownership. In 1960, 44 percent of all households in the U.S. were married couples with children. Today, it’s less than one in five (19 percent), and this trend is expected to continue.
“Apartment rentals are on the rise, and this trend is expected to continue at least through 2030, which means we’ll need millions of new apartments in the U.S. to meet the increased demand. The western U.S. as well as states such as Texas, Florida and North Carolina are expected to have the greatest need for new apartment housing through 2030, although all states will need more apartment housing moving forward,” said NAA Chair Cindy Clare, CPM.
There will also be a growing need for renovations and improvements on existing apartment buildings, which will provide a boost in jobs (and the economy) nationwide. Hoyt’s research found that 51 percent of the apartment stock was built before 1980, which translates into 11.7 million units that could need upgrading by 2030. The older stock is highly concentrated in the northeast.
“The growing demand for apartments – combined with the need to renovate thousands of apartment buildings across the country – will make a significant and positive impact on our nation’s economy for years to come,” explained NMHC Chair Bob DeWitt. “For frame of reference, apartments and their 39 million residents contribute $1.3 trillion to the national economy. As the industry continues to grow, so will this tremendous economic contribution.”
Other highlights from the report include:
- Demand is expected to be especially significant in Raleigh, N.C., where demand calls for a 69.1 percent increase in new apartment units between now and 2030, Orlando, Fla. (56.7 percent), and Austin, Texas (48.7 percent). Also notable, the demand in the New York City metro area will call for an additional 278,634 apartment units, Dallas-Ft. Worth, Texas (266,296 new units), and Houston, Texas (214,176 new units).
- Propensity to rent is higher in high-growth and high-cost states.
- Hundreds of thousands of new rental units will be needed by 2030 in states such as California, Georgia, Arizona, Florida, North Carolina, Nevada, New York, Texas, Virginia and Washington.