KBRA Releases Research – CRE Secular Trends: The Multifamily Affordability Squeeze

KBRA releases research on the multifamily sector and the affordability challenges that it faces. While federal assistance programs minimized evictions on a temporary basis during the COVID-19 period, a major portion of lower-income renters’ disposable income is spent on rent, resulting in the current affordability crisis for many. Based on the most recent U.S. Census data, 22.9% of households spent at least 50% or more of their income on rent in 2021, which meets the Department of Housing and Urban Development (HUD) definition of “cost burdened.”

As higher-end multifamily properties have dominated recent new construction, moderate- and lower-income housing options have decreased for renters. According to the National Apartment Association (NAA) and National Multifamily Housing Council (NMHC), construction of smaller properties with fewer than five units—a source of more affordable housing—is becoming rarer, with 80% of new construction comprising five or more units in many markets. Some markets are looking to new initiatives to encourage the construction of smaller units, including revisions to zoning and parking ratios to make affordable housing construction easier.

According to KBRA’s report, to meet the demand for affordable options, developers may need to refocus on innovative redevelopment projects and property type conversions. However, community and government support will be essential in making the necessary changes to zoning and legislation to ensure these projects are viable.

The report is part of KBRA’s ongoing series on the secular trends that are transforming the “new normal” landscape in commercial real estate (CRE) across property types.

Click here to view the report.

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About KBRA

KBRA is a full-service credit rating agency registered in the U.S., the EU and the UK, and is designated to provide structured finance ratings in Canada. KBRA’s ratings can be used by investors for regulatory capital purposes in multiple jurisdictions.

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