(Missing Middle Housing | Image: Opticos Design)
A new research snapshot from JLL puts Philadelphia's recent run of apartment construction in a helpful national context, showing that the rental housing "boom" here has really been awfully tiny compared to the last decade in the other nine largest U.S. metros.
"Following the 2008 financial crisis and the 9-year growth cycle that has followed, multifamily rental units have arguably been the hottest commercial real estate asset class. In Philadelphia, this trend has been no different: 5,000 units of ground-up multifamily have delivered in Greater Center City since 2012, with rents that eclipse office space on an annual basis. The desirability of apartment living has even reached the suburbs, with new “edge cities” like King of Prussia developing thousands of units of apartments to accommodate shifting residential preferences.
Like most things in Philadelphia, however, it’s important to contextualize this trend with broader, national numbers. While the region will see 19,000 new apartments delivered by the end of 2019, this “boom” is less than half the average number of units delivered across the 10 largest U.S. metropolitan areas, putting Philadelphia dead last when it comes to the production of new multifamily housing.
This context is good, bad, or ugly depending on your perspective: for developers, it means that we likely have not reached a point of oversupply, and rents will rise. For apartment occupiers, it means rental housing is likely to continue to get more expensive in the mid-term as new supply is absorbed. For public policy officials, it means that something is holding the region back from achieving its full population, economic, and real estate potential."
While it's been common to hear some commentators fretting about supposed overbuilding, or even a bubble, this is typically just an anecdotal observation related to the visible (but still pretty moderate) changes happens mostly around greater Center City, and isn't really based on anything more than that. The quarterly reports from Lindy Institute have continued to show a tight housing market deep in Seller's Market territory, with a troubling gap starting to open up between population growth and the supply of homes.
Even more troublingly, the forthcoming Housing Action Plan draft will reportedly target a lower rate of housing growth than we've seen in any year since the end of the Greater Recession, with an absolutely pathetic goal of less than 2 units constructed per 1,000 people per year.
The "something...holding the region back," of course, is zoning. City Council members, particularly Darrell Clarke, keep zoning away all the 'Missing Middle' housing options (duplexes, triplexes, and small apartment buildings) from growing neighborhoods during zoning remapping, which is the exact opposite approach we should be taking if we're expecting continued population growth in the areas around greater Center City, and neighborhoods around busy commercial corridors.
The Housing Action Plan should address this issue head on, and lay out a strategy for the administration to push back on mindless downzonings that are destroying housing capacity in growing neighborhoods for no good reason.
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