Two economists debunk the claims of challengers to new multifamily housing construction
More than one-third of U.S. households are renters, the highest share in nearly 40 years. Spending from those 38.7 million apartment residents contributes $3.4 trillion to the national economy each year, and the operation of the country’s 20.7 million apartment homes contributes $175.2 billion.
Billions of dollars in taxes and millions of jobs are among the other clear economic benefits of apartments, according to Eileen Marrinan and Robert Hess, co-authors of “The Contribution of Multifamily Housing to the U.S. Economy.” Released in September, the report measures the industry’s economic impact from 2013 to 2016.
Why, then, is the U.S. not building enough apartment homes to meet growing demand for rental housing? One major barrier to new construction is that even as communities across the nation face a crisis-level shortage of affordable housing, members of the NIMBY (Not In My Back Yard) camp loudly maintain that apartments are more detrimental than additive.
Marrinan and Hess said these groups fall back on arguments that ignore the very real ways apartments and the people who live in them contribute to communities across the nation. Here are three things NIMBYs get wrong, according to Marrinan and Hess’ report:
1. New Multifamily Housing Doesn’t Threaten Local Businesses. It Boosts Them.
NIMBYs claim new apartment developments threaten existing businesses in the community, especially driving out smaller, family-owned businesses and replacing them with others that don’t have local roots. But the opposite holds true. An influx of new residents to an area brings more customers, clients and consumers to local shops and stores. In fact, spending by U.S. households living in apartment properties of more than five units generated $3 trillion in 2016, up 18 percent from 2013.
“If you have new apartment development in the neighborhood, you’re basically accommodating population growth,” said Marrinan. “Small local businesses generally welcome new residential construction for the new customers that it brings.”
Hess added that most apartment residents generally fall into two categories: young professionals new to financial freedom and older residents who are spending down their savings. “This actually tends to produce positive impacts on the surrounding mom-and-pop businesses simply because higher density produces additional demand for your local drycleaners, delis, nails salons and barbershops, for instance,” he said.
2. New Residents Don’t Limit Employment Opportunities for Existing Residents. They Spur Job Creation.
Counter to NIMBY concerns that employment opportunities dwindle in communities when new residents come in, more housing leads to greater opportunities for all residents.
According to Hess and Marrinan’s report, the apartment industry supported 17.5 million jobs in the U.S. in 2016, with 16 million generated as a result of renter household spending. Overall, the apartment industry generated 12 percent of employment growth that year.
“This employment impact is large,” Hess said, again because of apartment dwellers’ propensity for spending. “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, broadly supporting job growth.
3. Apartments Aren’t a Drain on Local Services. The Taxes They Generate Are a Boon to Local Economies.
NIMBYs argue that if new apartments are built, bringing more people into a neighborhood, public services such as transportation, education and general infrastructure will be overextended at the expense of already-established residents.
But according to the report, tax payments associated with apartments — including taxes paid by residents of these buildings — contributed $408.9 billion to the national economy. In fact, renters alone more than doubled the total economic activity and jobs attributable to federal, state and local tax payments from 2013 to 2016. These taxes support schools, improvements to local infrastructure and other public services in communities.
Local governments, developers, business owners and existing residents working together can improve the vibrancy of their neighborhoods, the two researchers suggested.
Furthermore, Marrinan said, places with dense multi-family housing can be much more efficient for public utilities and transit than low-density areas. These services cost more to build out and run when populations are sparser and, as a result, may not be self-supporting or sustainable — which could lead to more cost for taxpayers.
Hess and Marrinan’s report demonstrates that apartments clearly have a significant, positive economic effect on their communities. Finding the most effective ways to incorporate this type of housing for maximum impact should be the goal moving forward. When it comes to constructing new apartment buildings, Marrinan said, the conversation simply needs to change. “The question shouldn’t be ‘yes or no,’ but ‘How should we do it?’ and ‘What’s the best way to do it?’”