Friday Factday: New Construction Adds Few Affordable Units for Renters

The uptick in construction activity since the great recession has generated many new residential building projects in the Atlanta Metropolitan Statistical Area (MSA).  While some of the new housing in these projects has been designated affordable, it appears that these newer constructed buildings are demanding higher rents than their older counterparts.  The first chart below offers a clear picture of how average rent is related to the year a building was constructed in the metro region, with buildings constructed between 1990 and 2015 having above average rents–and increasingly higher rents the newer the building¹.  In short, someone looking to live in the metro region is much less likely to find an affordable unit in a newly constructed building than they would in an older one.  This trend seems to be continuing with CoStar reporting a median rent for the MSA of $1,694 in multifamily projects completed in 2016 or 2017.

While part of the lack of affordable units in newer constructed buildings is of course is due to the generally higher rents in those new buildings, it should also be noted that units in newer buildings make up only a small portion of the overall rental units in the metro region.  As seen on the chart below, of the estimated 779,979 renter-occupied units in 2015 in the Atlanta Metro region, only 2.9% were in buildings constructed since 2010².  The smaller number of units in buildings constructed after 2010 is also evident on the chart above in the large margins of error (denoted by the length of the bracketed lines) for estimated rents in those newer buildings*.

The estimate of the overall share of total rental units found in buildings constructed in the current decade will no doubt rise over the next few years with new construction activity and as recently built projects become occupied.  Even with the nearly 150,000 new residential building permits issued from 2010 to 2016, the chart below shows that the bulk of these permits were for single-family units³.  Single-family units are less likely than multifamily units to be occupied by renters.   In short, the available data seems to suggest that new multifamily residential buildings are currently adding little to the overall stock of affordable rental units in the Atlanta Metro region.

For a closer look at the state of affordable housing in the metro area, check out this interactive data dashboard created through a partnership between Neighborhood Nexus and the Enterprise Foundation.

*Smaller sample sizes produce larger margins of error.