How an Apartment Boom Can Help Create More Housing Choice Stability

Cities that want to add hundreds of housing units at a time are embracing the addition of large-scale apartments alongside other types of housing. These big multifamily housing projects are on track to break national records this year and add an estimated 2-million units by 2028. But will the current economic climate allow the building boom to continue and do communities want large-scale apartments in their neighborhoods?  

Interview guests: Yardi Matrix Manager of Business Intelligence Doug Ressler, Vice President of the Greater Cincinnati Northern Kentucky Apartment Association Justin Seger, and Assistant Anderson Township Administrator Steve Sievers 

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Transcript

Ann Thompson:

Large scale apartments can add to the housing supply in a big way, and plenty of developers are building these sizable projects.

Justin Seger:

There was a time when apartments or rentals were kind of a dirty word. It's not the case anymore.

Ann Thompson:

Some experts say recent construction mirrors the building boom of the 1970s. One example, just in the last four years, Greater Cincinnati's Anderson Township, a community with very few apartments, added more than 700 units.

Steve Sievers:

For the better part of two and a half years we've heard backup beepers and trucks and dirt and been washing our vehicles daily as we traverse the road going up the hill.

Ann Thompson:

This year Greater Cincinnati is on track to welcome about 4,000 new apartment units. For Metro Dayton it's more than 550. Nationwide will set a record for apartment construction, surpassing a half million units. In some areas, the increased competition is holding rents down, but much of it caters to luxury living,

Dan McCue:

So we're losing units on the low end of the rental stock and we're gaining units really at the highest end.

Ann Thompson:

How long will this building boom last? Some say it's already starting to turn. And what about regulatory roadblocks?

Marjy Stagmeier:

So, there are a lot of developers out there that want to do this work. If we can get through the capital and get through the regulatory environment.

Ann Thompson:

Not everybody is for it. There is neighborhood resistance.

Lakesha Walker:

I have a six foot privacy fence, so that's not going to be privacy when I have a three story or a four story apartment building looking over me.

Ann Thompson:

On this episode of Brick By Brick, we look at how large scale multifamily units can help ease the housing crisis. What about exclusionary zoning? Will more high-end apartments eventually mean more available housing for middle and lower income residents? And will communities welcome this type of housing? Let's get into it. This is Brick by Brick: Solutions for a Thriving Community. 

Ame Clase:

Brick by Brick is made possible thanks to leading support from Debra and Robert Chavez, Greater Cincinnati Foundation and the George and Margaret McLane Foundation, with additional major support from The AES Ohio Foundation, Laurie Johnston and the Seasongood Good Government Foundation, Diane and Dave Moccia, The Robert and Jean Penny Endowment Fund of The Dayton Foundation, the Robert & Adelle Schiff Family Foundation, and more. Thank you.

Ann Thompson:

Hello and welcome to Brick by Brick where we're highlighting solutions for a thriving community in Southwest Ohio. I'm your host Ann Thompson. Three years ago, developers saw an opportunity to build big apartment buildings. At the time, interest rates were low, the housing gap continued to grow, and the supply of single family homes was not only declining, but the cost was escalating. Now those apartment buildings are coming online and will be opening up in our region and beyond. Brick by Brick wondered if these large multifamily units make a difference as a supply side solution, adding housing units and possibly stabilizing rising rents. We also wonder how long the boom may last. The real estate company, Yardi Matrix predicted the surge. Doug Ressler is manager of Business Intelligence.

Doug Ressler:

What has happened is you have this surge of new supply that is coming out between now 24 and 25 unprecedented in terms of over 500,000 units in this year, and somewhere around 440,000 next year, maybe even more,

Ann Thompson:

That 500,000 would be a record by 2028 Ressler estimates 2 million additional apartments across the nation.

Doug Ressler:

We see immigration as being a very strong wind that will continue to build demand within commercial real estate, and we just hope that collaboration can be seen with policymakers and business leaders to be able to come up with equitable solutions that really fit the need of the growing housing shortage.

Ann Thompson:

The projected local units through 2028 total more than 10,000 for Greater Cincinnati, including Lebanon, Mason and West Chester. For Suburban Dayton, new apartment units are expected to increase by 2100 units. That includes projects in Huber Heights, Kettering, and Trotwood. Dan McCue of Harvard University's Joint Center for Housing Studies is tracking the demand.

Dan McCue:

Kind of charging ahead so it's not in a downfall. So we're still seeing really solid growth in the number of renters out there.

Ann Thompson:

But in Southwest Ohio, these large scale apartments make up an exceedingly small part of the housing stock. An analysis by local firm Blume community partners shows only 14% of all units built since the year 2000 in Hamilton County are large scale multifamily buildings. Large scale equals more than 50 units in this case, and as of May, 2023, this type of housing only accounted for 6% of the Hamilton County housing stock. From Montgomery County, based on our calculations from the auditor's office, the percentage of large scale multifamilies make up approximately 8%. The national average is 28%, although it varies greatly among cities and states building more could keep rents down. From 2017 to 2022, Minneapolis increased its housing supply by 12% by building a lot of new apartments and rents grew by only 1%. Minneapolis planning director Meg McMahon, told Brick by Brick, her advice to other cities when it comes to increasing the housing supply is to build more apartments,

Meg McMahan:

Figure out ways to get those allowed in more places. Those will have less of a headwind when it comes to financing. Developers know how to build those and make money.

Ann Thompson:

While the rent in Minneapolis increased just one. The rest of Minnesota saw a 14% increase during that time. Here's something else. According to the real estate company CoStar, Myrtle Beach, South Carolina had the highest rate of apartment construction in the third quarter of last year, 21% and saw a 4% decrease in rent. You can see that research at cetconnect.org and thinktv.org, which highlights 10 cities where rent declined in many places. However, rent is still going up. Redfin reports, Cincinnati saw an increase of 11% to an average of about $1,400 a month from May of 2023 to May of 2024. The median rent price in suburban Dayton is about $1,200 a month, up 5% from the year before. It's important to note that most of the apartments built nationally and locally in the last five years are high end and cater to mainly upper middle and high income renters. One of these luxury developments is set to open this fall in Hamilton County's Anderson Township Assistant administrator Steve Sievers stands on the township building's balcony and looks out at the Vantage. The apartment complex is tucked between the township building and medical offices and next to the Anderson Towne Center on Five Mile Road.

Steve Sievers:

It has been a construction site that we've kind of seen ongoing now for about eight years all the way through the pandemic, but we're hopeful that this will not be. This is the next phase, but it's not the last phase.

Ann Thompson:

This is the third big apartment complex here in the last four years. That's unusual for Anderson Township, which is known for green space and single family homes. Inside the township building Sievers points to the wall.

Steve Sievers:

These are our current zoning map and our future land use map. So I mentioned a few times kind of our comprehensive planning.

Ann Thompson:

There's lots of yellow on the map and that equals single family homes and not much red. Red stands for apartments.

Steve Sievers:

Having a home ownership rate of 87% or 90% and 90% of our housing units being single family detached has been really strong, but that's not where the future is going, and so it's been a slow process to kind of work through that, a number of plans later.

Ann Thompson:

In the past decade, like many other communities, Anderson Township realized it needed to diversify its housing stock after seeing people move to Clermont County and into the City of Cincinnati where there were more apartments. If the phased in development goes as planned, the latest Clermont County development will have 1000 units. For Anderson Township there were a few bumps in the road. The developer of One30 at Stonegate Apartments ultimately downsized the project after complaints about traffic density and a reduction in green space. It opened in 2020 and another big apartment complex, Skytop, had its grand opening last year. Brick by Brick’s, Hernz Laguerre Jr. wondered who is moving into these new apartments and others like them, and if middle income and lower income renters will see any benefit from this apartment, boom. Hey, Hernz.

Hernz Laguerre Jr.:

Hey, Ann. Yeah. We've been hearing throughout our research and recordings for this podcast that we need more housing. Everyone across the board would agree with that, but what happens to the rest of the housing market when a new development gets built? I sat down with a Penrose home builder and a resident of one of his new developments to find out, take a listen. 

Linda Deering lives at the John Arthur Flat Senior Apartments. Her space is serene. There are monsteras, palms, peace lilies, and other plants all around bringing the peace of the outdoors inside. In the middle of the living room hangs a chime as the bells ring. It makes Deering reflect on when she sought out peace and meditation because of her cancer diagnosis in 2021.

Linda Deering:

This bell is a reminder me and my journey, especially with my breast cancer and from stage to stage, when you go from one stage in your treatment to another, you ring a bell, do the chemo, and okay, that's bell time you do another round bell time radiation. So it was just a setup to let you know that you're still here, you're still kicking you moving forward, you're not standing still.

Hernz Laguerre Jr.:

Linda is a stranger to standing still. She enjoys moving and she loves living in a spacious single family home. She's originally from West Virginia, raised her kids in Kansas where she made her career in juvenile corrections. Then she hopscotch between West Virginia, Cleveland and ultimately landed in a two floor duplex she loved in the Westwood neighborhood of Cincinnati before she moved to her current apartment. Daring says seniors her age normally like to stay still,

Linda Deering:

But I thought I'd take a risk, take a chance, try something new.

Hernz Laguerre Jr.:

But her move to John Arthur Flats wasn't purely off a whim.

Linda Deering:

I downsized because of my illness. It became more of an issue with up and down the stairs and I thought it would be a good idea to get on one floor. Being that I'm a senior.

Hernz Laguerre Jr.:

Linda's move, helped her out while she was dealing with her health issues, but by doing so, she may have helped shift the housing market. Consider this, if someone were to downsize or upgrade to a completely new home, their old space may be an opportunity for a potential home buyer or renter. Notre Dame researcher, Evan Mast calls this filtering. He found:

Evan Mast:

That if you put up say, 100 new luxury apartments, that ultimately opens up something like 50 vacancies in below median income neighborhoods. So there's a pass through of about 50% from those new builds to vacancies. In kind of starterish areas.

Hernz Laguerre Jr.:

Linda moving into the John Arthur Flat apartment building created a vacancy in her old duplex in Westwood. Her former landlord, Andre Smith, said a woman from a shelter home was able to move in shortly after John Arthur Flats property manager Monica Jackson says most of the residents downsize like Linda.

Monica Jackson:

People that were moving here were downsizing. They weren't able to maintain the maintenance of their homes. They didn't feel safe in their homes. They sell their homes to move here, and then families that can afford the homes and afford to maintain the homes can now move into those homes.

Hernz Laguerre Jr.:

Penrose is a development company behind multiple large scale apartment buildings in Cincinnati, such as HaNoBe, which is market rate housing in College Hill and Thatcher Flats, which is affordable housing in the Walnut Hills neighborhood. Penrose is also built John Arthur Flats.

Geoff Milz:

This is a senior affordable building and it's L-G-B-T-Q affirming.

Hernz Laguerre Jr.:

That's Geoff Milz, director of development for Penrose.

Geoff Milz:

And so you don't of course have to be queer to live here, but this building is set in a neighborhood that has always been friendly to the queer community.

Hernz Laguerre Jr.:

Jeff says they have a community first approach to development.

Geoff Milz:

We do a lot of work before any kind of application or before any kind of design to make sure that what we intend to build is going to be a good fit for that community. So we go to places where we're wanted.

Hernz Laguerre Jr.:

What do large scale apartments do for a city like Cincinnati?

Geoff Milz:

You maximize your efficiency by putting so many units on one space. Many folks who have moved here have moved here from a home, a single family home that is now was at one point for sale and is now occupied by somebody else. So if freed up a unit in the neighborhood and so doing, you've sort of activated that real estate market and created more opportunities for younger folks to get their starter home, which is harder and harder to do these days.

Hernz Laguerre Jr.:

But Geoff says we need a variety of housing in Cincinnati.

Geoff Milz:

The best path forward for housing in Cincinnati is housing that is dense, more dense. I think that it's aligned with existing infrastructure. I'm not talking about it's going to be all apartment buildings in the City of Cincinnati, but it could be single family attached. It could be fourplexes, and that's a lot of what connected communities was contemplating and hopefully will achieve.

Hernz Laguerre Jr.:

And while she enjoys the benefits of her own recently built apartment and the chain of movement it created, Linda also still recognizes the need to build even more.

Linda Deering:

There's just not enough housing, but yeah, me moving can free it up for another family the same way if I moved out of here, it frees it up for another senior, but there's still not enough housing. Excuse me, not enough affordable housing.

Ann Thompson:

Thanks for that, Hernz. It sounds like Linda has found the perfect place for her. What are some of the obstacles for places like Penrose to build more affordable housing, like Linda was talking about?

Hernz Laguerre Jr.:

Yeah, it's a mixture of a few things we discussed in the podcast already, so some of our listeners may be familiar with this. Affordable housing is not affordable to build. Geoff told me that there are so many factors that go into developing affordable housing and getting the funding such as site selection, finding additional funders and finding community partners. Zoning is another thing, but as Geoff mentioned, with the passing of connected communities, it increases options on where they can build. And last is construction. The cost of materials just continue to rise, so that's going to continue to be a factor and honestly, the list could go on, but the most important note I want to emphasize is that the developers like Penrose and residents like Linda want to see a variety of homes that fit what the community needs.

Ann Thompson:

Thanks, Hernz. We'll hear from you in the takeaways.

Hernz Laguerre Jr.:

Cool.

Ann Thompson:

Coming up on Brick By Brick, what it takes to build one of these large scale multifamilies

Justin Seger:

From entitlement to first delivery of the first home in a community that can be a three to five year process

Ann Thompson:

And plans for an affordable housing development in Cincy. Go ahead. Despite opposition that's ahead on Brick by Brick.

Ame Clase:

Brick by Brick is made possible thanks to the generous support of so many, including Rosmary & Mark Schlachter, The Camden Foundation, Patti & Fred Heldman, DeeDee & Gary West, The Stephen H. Wilder Foundation, Judith & Thomas Thompson, a donation in memory of Frank and Margaret Linhardt, and more. Thank you. We couldn't do this work without you.

Mary Hall:

Hey, it's Emiko Moore from Brick by Brick. Our new podcast is about finding solutions that will allow our communities to thrive. What does a vibrant and engaging neighborhood look like to you? Maybe it has more restaurants, coffee shops and art galleries, more multi-generational park activities, or a livelier music scene. We want to know, please go to the Brick by Brick show page on cetconnect.org or thinktv.org. Just click on the green audience button and tell us what a thriving community looks like to you. You can also email us at Brick by brick@publicmediaconnect.org. Imagine big and wide get creative. We can't wait to hear from you and thanks.

Ann Thompson:

Welcome back to Brick By Brick Building a large scale apartment building isn't easy and it isn't fast. Justin Seger knows this all too well. As Chief Operating Officer for Hills Properties, the developer of Anderson Townships, the Vantage and other projects around the region, brick by brick, ask him what's involved.

Justin Seger:

You have a concept. You're going to build a narrative. You're going to get the project approved by municipality. As part of that process, you have to work with an architect to design the project. Interior, exterior, you're building a unit mix. You're doing all of those things. You have to come up with the money to actually close on the land,

Ann Thompson:

And that's just the beginning. It could be three to five years until people move in. Seger is also vice president of the Greater Cincinnati, Northern Kentucky Apartment Association and chair of its legislative committee for Ohio.

Justin Seger:

Multifamily is part of the national conversation every day. It can be something on the local level like an inspection program that's just entirely to onus on developers and landlords. It can be something as large as presidential candidate talking about building 300,000 affordable units in the Midwest.

Ann Thompson:

Seger says there's still a lot to be done. Cincinnati lags behind some of its counterparts in supply.

Justin Seger:

There are a lot of reasons for that. I think one of the most obvious that doesn't get talked about is the topography and terrain of Cincinnati and some of the land restrictions. Indianapolis, Columbus. These are pretty flat, shovel ready municipalities and a region that's easy to build on Cincinnati, that's not the case.

Ann Thompson:

Plans are underway for two new large scale apartment building in Cincinnati's Bond Hill, part of the Villages of Daybreak development. In September, Cincinnati Council approved the 150 affordable housing units called Seymour Station. This despite objections by the Bond Hill Community Council and hundreds of residents who own single family homes in that same 60 acre development, Lakesha Walker wonders why it must be three and four story apartments in statements to council members. She said an earlier developer promised condominiums,

Lakesha Walker:

There are single family homes and condos going all over the city of Cincinnati. When you drive through neighborhoods like Hyde Park, Oakley, you see it throughout the city. Why can't it be in Bond Hill?

Ann Thompson:

Another resident Mary Hall told Cincinnati Council's equitable growth and housing committee, she paid 300,000 for her home and wants it to be worth $400,000 some years from now.

Mary Hall:

Generational wealth. That's what we're here for. We're protecting our roots. Please save them.

Ann Thompson:

Despite this council members voted in favor of the project by a vote of six to one with Scotty Johnson going against it and Vice Mayor Jan Michele Lemon Kearney recusing herself. Council member Reggie Harris defended his yes vote saying it will add more housing to a property that is set empty for decades.

Councilmember Reggie Harris:

The numbers do not pan out for single family home. I absolutely understand the residents of the village of their daybreak. They were promised that by Drees 20 years ago. That is something that they say that they want the financing for that does not pan out.

Ann Thompson:

Council Member Harris's office says the name of the game going forward is to see how projects pencil out when rents are still relatively low compared to the cost of building in Cincinnati. The city will be updating its commercial tax abatement policy and Harris's office says it must prioritize getting money into those projects so more units can come online. Council member Mika Owen says she's happy to support the Bond Hill development

Councilmember Meeka Owens:

Investment is a good thing in communities. Building more housing is a good thing in communities. Investment begets more investment and particularly in neighborhoods that haven't seen it.

Ann Thompson:

When finished, Seymour Station will be affordable at 50 to 70% AMI for a family of four, the maximum income is a little more than $73,000. That family with a two bedroom apartment would pay $1,652 a month based on some of the Bond Hill neighbor's resistance to this new housing. Some might wonder what effect low-income housing has on the property values of surrounding homes. The A-Mark Foundation, a nonpartisan nonprofit who makes grants and publishes unbiased research reports more than a dozen studies have mostly concluded that there was either no impact or positive impacts on property values. In seven cases that were looked at, property values actually increased. You can dig into this research yourself via the links at cetconnect.org and thinktv.org giving us more color to the challenges that developers face in creating affordable housing. We recently caught up with Atlanta developer Marjy Stagmeier, who wrote the book, Blighted. She Buys and Renovates rundown apartment buildings. Her housing is not subsidized, but it is affordable. Finding enough capital is one of her challenges.

Marjy Stagmeier:

And then of course, the capital markets trying to find the money to be able to do this because if you're going to build just market rate class A apartments, well, I mean you have a line of people out your door, but when you show your investors that you're not giving them a huge return, then the line gets much, much smaller and thinner.

Ann Thompson:

The regulatory environment is the other challenge. Meyer credits Atlanta Mayor Andre Dickens for streamlining the permitting process from 18 months to about six months. Doug Ressler with Yardi Matrix gives other examples.

Doug Ressler:

You see that in a couple of other cities, Washington DC with Mayor Bowser. You also see it that they're attempting to do it in New York City, Chicago. It's not linear. It doesn't go from A to B, but there are those collaborations where public policy makers are working with the business leaders and communities to be able to incent that effort.

Ann Thompson:

In Greater Cincinnati the permitting process takes between 12 and 24 months as communities weigh the advantages and disadvantages of adding more large scale apartments. They're thinking about housing shortages, land scarcity, economies of scale, lifestyle appeal, and the inability to buy a home. According to Tim Sanfransky who wrote “The Rise of Mega-Apartment Buildings in US Cities.” The drawbacks include straining existing infrastructure, traffic, congestion, and access to services in schools, limitations to producing more large scale apartment complexes involve development costs, permits and starts or public records marking. The beginning of planning or building at any given time are all down double digits. Now in part because of the inflationary environment we're in, both materials and labor are 20 to 30% more expensive than they were a few years ago, and it's expected to stay that way through next year. Also, equity requirements have changed. Dan McCue again.

Dan McCue:

Completions are still rising, are still pretty high, but that's stuff that was permitted 2, 3, 4 years ago, and so it's kind of a big train that has to turn. And so right now that train is headed south.

Ann Thompson:

Sanfransky, VP for acquisitions for BZ construction Management, operating in Florida and Texas, says 41% of multifamily costs are related to regulation. Other limitations include exclusionary zoning. Again, that means when the zoning code excludes certain types of land uses in a community. Additionally, federal and state programs can often tie the hands of cities and developers. Cincinnati Councilmember Jeff Kramer says the Bond Hill development had very little flexibility because the city is relying on state and federal dollars. He says, in the future, that can change if the city can come up with more of its own revenue. Also, challenging for developers is building on hilly land. Something Cincinnati faces, as pointed out by Jeff Seger, experts say, cities and builders must prioritize infrastructure, investment, mixed use development, affordability, and community engagement. Sanfransky says this takes careful planning and a data-driven approach.

 Remember, if you want to learn more about large scale apartment buildings and their benefits and drawbacks, there are plenty of resources including web articles, video and audio stories, and online extras. Go to cetconnect.org and thinktv.org. And while you're there, you can click on one of the big green buttons to give some feedback or answer our current audience question. We'd really like to hear from you. We had plenty to think about for this episode. It's time for takeaways. Emiko is out, but we say hi to Hearns.

Hernz Laguerre Jr.:

What's up, Ann?

Ann Thompson:

Hey, Hernz. What's on your mind?

Hernz Laguerre Jr.:

Yeah, I know we briefly mentioned this in the podcast, but real estate company, CoStar, they did some research about new housing supply and they found that a surge in new housing supply leads to a moderation in the of apartment rents or a plateauing of rent. And I think that dominoes into what Geoffry Mills from Penrose told me. He told me he used to work in a public sector specifically in economic development, and there was something he was telling me about reduction in rent leads to more economic development, more economic growth, and it makes sense, right? Because if people aren't spending all their hard earned money on their rent, they can spend their money in the local economy and the local mom and pop shops and stuff like that, and that builds the local economy. Some may even say that builds a thriving community.

Ann Thompson:

That's great, Hernz. That certainly makes sense. Well, we've said this before in doing research for this podcast, one thing that's difficult is comparing apples to apples. We hear from various nonprofits about how much housing is added, and we can look at housing starts, but it's hard to determine exactly how much we're actually increasing the housing supply because there are also demolitions of blighted housing and renovations, turning apartments, let's say, into houses. Cincinnati has a dashboard, we can easily check this out. It showed in 2023, Cincinnati lost at least 264 units to demolition and renovations in 2024 removed 104 units. But many other agencies in municipalities don't have this easy accessibility to this data,

Hernz Laguerre Jr.:

And I would imagine it would help a municipality big time because it would help where you're at if you know how many houses are coming off the market and on the market.

Ann Thompson:

And that study that you referenced with CoStar, you can see that for yourself@ctconnect.org and think tv.org where they compared 10 cities that added lots of apartments and you can see that their rents went down. Thanks for your insights, Hearns. No

Hernz Laguerre Jr.:

Problem, man.

Ann Thompson:

Coming up on the next episode of Brick by Brick, we've mentioned the solution of adaptive reuse on the pod before. Check episode two for our report on how vacant office buildings are being turned into housing, but what about other kinds of buildings?

Steve Timmel:

The manufacturing buildings, the warehouse, buildings that are deeply rooted in Cincinnati's history Over time, they have been converted

Ann Thompson:

Part two of our examination into creative residential conversions. That's next time on Brick by Brick. That's our show. If you like what you hear, please rate and review our podcast. It makes it easier to find. We hope you learned something, and if you did, please tell your friends and family about it. For Herz Legger Jr. And Amaco Moore, I'm Ann Thompson. We'll be back soon with more solutions. Take care. 

Our show is produced, hosted an edited by me, Ann Thompson with reporting and story editing from Hernz Laguerre Jr. and Emiko Moore. Our Executive producer of Mark Lammers. Our show consultant is Gloria Skurski. Gabe Wimberly is our audio engineer and mixer. Zach Kramer runs the lights and cameras. Derrick Smith is our production specialist and Jason Garrison is our production manager. Kellie May heads up our marketing and promotions, along with Mike Shea and Bridgett Dillenburger. Elyssa Stefenson handles the website and Steve Wright is our designer. Bill Dean and Andres Kruza are the engineers for the show and our Chief Content Officer is Colin Scianamblo. Our music is from Universal Production Music. Brick by Brick: Solutions for a Thriving Community is a production of CET and ThinkTV, Southwest Ohio PBS member stations.