5 Key Facts About Apartments and the Economy
A briefing memo highlighting the apartment industry’s impact on the U.S. economy
Housing is a vital and pressing issue in communities across the nation. And many municipalities — large and small, rural and urban — face a common challenge: They are simply not building enough housing to meet demand. That shortage is a key driver of rising rents that you might be witnessing in your area. We must act quickly because many working people are already being priced out. The U.S. will need to build 328,000 new apartments per year until 2030 just to meet current demand and improve affordability.
More than that, the nearly one in five U.S. households that call apartments home today are an economic boon to their communities. But restrictive zoning regulations in many parts of the country have prevented the construction of new homes. Communities nationwide are exploring solutions — such as transit-oriented development, public-private partnerships and reformed zoning laws and processes — to create the housing supply needed to help more people live affordably.
These communities have embraced the idea that multifamily housing and its residents are valuable contributors and essential for healthy and robust economic growth. Apartments boost local businesses and spur job creation, and apartment dwellers wield profound spending power.
Here are five statistics you should know about the apartment industry and its residents:
$3.4 Trillion in Total Contribution to U.S. Economy
As more and more people move into and rent apartments, the apartment industry is naturally emerging as an economic engine nationwide. Robert Hess, coauthor of the recent report from the National Apartments Association and National Multifamily Housing Council, “The Contribution of Multifamily Housing to the U.S. Economy,” said renter household spending “tends to produce positive impacts on the surrounding mom-and-pop businesses simply because higher density produces additional demand for your local drycleaners, delis, nail salons and barbershops, for instance.”
The apartment industry helped contribute to nearly one-fifth (19 percent) of total U.S. GDP in 2016. Dollars are generated in a number of ways: construction of new rental units; expansion, renovation and repair of existing properties; operations and maintenance expenditures; and spending by renting households.
$106 Billion Economic Impact From New Construction
Even before residents of new multifamily developments move in, the construction projects themselves feed a community’s economy. In 2016, the industry’s spending on new construction contributed more than $106 billion to the national economy, more than doubling from $52 billion in 2013. This includes the purchase of goods associated with construction, including materials, equipment and labor.
A top priority for policymakers should be reforms to approval processes and regulations that increase costs and drag out timelines, said Paige Mueller, a real estate expert on the research team that created the National Apartment Association’s “U.S. Barriers to Apartment Construction Index.”
$3 Trillion in Renter Household Spending
Of the $3.4 trillion in total contributions to the U.S. economy, nearly 90 percent — or $3 trillion — is from renter spending. Just like other households, renters spend on transportation, food, personal care and other day-to-day purchases. So, when multifamily housing arrives in a neighborhood, their new residents are good for business.
“Small local businesses generally welcome new residential construction for the new customers that it brings,” said Eileen Marrinan, who coauthored the “The Contribution of Multifamily Housing to the U.S. Economy” report with Hess.
$350 Billion in Tax Payments
Tax payments on all levels — federal, state and local — from apartment residents more than doubled in the past three years. New tax revenue streams and increased local density from new developments can be a boon for local infrastructure investments, Mueller said, making it easier for local and county governments to efficiently allocate public resources so that they are helping as many residents as possible.
17.5 Million Jobs Supported
Jobs supported by the apartment industry — from construction, maintenance, or resident household spending — made up 12 percent of U.S. employment growth in 2016. Additionally, more than 90 percent of those jobs (16 million) were generated from renter household spending alone.
According to Hess, because apartment dwellers tend to be young professionals who are new to financial freedom or older residents spending down their savings, they can have a “large” impact on employment. “If you’re spending 95 percent of [your take-home pay], for example, a lot of that is going to be spread around” to local nearby businesses, he said, broadly supporting job growth.
The Bottom Line: From the moment construction begins to long after residents have settled into their new homes, apartments and renters significantly benefit the economies of their communities. Policymakers should support and introduce solutions that will help close the gap between supply and demand while meeting the housing needs of all residents. It’s what these communities need and what the people deserve.