Community Impacts of Multifamily Development

• America's changing population is creating demand for new types of homes

  After decades of construction that heavily favored single-family housing, the number of building permits issued for multifamily units in the Greater Philadelphia region surpassed those for single-family homes for the first time in 2014. Since then, the number of building permits issued for single-family and multifamily dwellings has been roughly equal. Today, roughly 30 percent of the residents of Greater Philadelphia rent their homes.

  Given this reality, it is important for planners, elected officials, and citizens to understand the forces shaping the multifamily housing market as well as how the potential benefits associated with multifamily housing can be leveraged to meet a variety of community and regional needs.

  The surge in demand for and production of apartments is being driven in large part by the convergence of several interrelated demographic and socioeconomic trends. Historically, certain demographic groups – such as young adults, nonwhites, and the lesser educated – have been more likely to rent than others. While rental rates have increased among these groups over the past decade, rental rates have also increased among some groups that have traditionally been less likely to rent, including whites and middle-aged adults.

  The growing appeal of and demand for rental homes can be partially explained by the changing nature of American households. Put simply, more people are living alone and there are fewer married couples with children. Nationally, the average household size has fallen from 2.76 people per household in 1980 to 2.52 per household in 2019. Over the same period, the share of households that are single people living alone rose from 23 percent to 28 percent.

  Households with children have historically driven demand for single-family homes. Despite an overall population increase of 44 percent since 1980, there are fewer married families with kids today than in 1980. Nineteen percent of all households in 2018 are composed of married couples with kids, compared to 31 percent of all households in 1980. (Endnote 1)

  Other demographic factors include:
  • Eighteen to 34-year-olds, the age group most likely to rent, represent an outsized portion of the population. The sheer number of young adults is helping to fuel demand for apartments. Economic challenges facing this cohort, such as student loan debt, is often cited as a barrier to home ownership.
  • Many young adults are delaying household formation and marriage. Historically, Americans have bought their first houses around the same time that they get married. However, both women and men on average are marrying for the first time five years later than they did in 1980.
  • Renting increasingly appeals to older Americans. According to U.S. Census figures, people age 55 and older represented the largest increase in renters in the decade following the Great Recession. Between 2007 and 2017, rentals increased 38 percent for people over 55 and 43% for people over 65.
  • Immigration is accounting for a larger share of population growth in many places. Immigration is a driver of apartment demand and may become even more of an influence if it eclipses natural population growth over the next decade. National Multifamily Housing Council data suggests that immigrants are more likely to rent, and more likely to rent for longer periods of time.

• Multifamily housing is a key component of smart growth

  Much of our region's growth in the latter part of the 20th century has been single use, auto dependent, and unconnected to existing development and infrastructure. This pattern of development has impacted our environment, increased our energy needs, and strained our transportation system.

  Smart growth communities that provide a mix of densities, housing types, land uses, and transportation choices offer a compelling alternative to development as usual. Multifamily housing is critical to the success of smart growth development. When thoughtfully designed and integrated into an existing community, multifamily housing can allow municipalities to manage growth in a way that helps to meet local objectives. Many of the potential benefits of multifamily housing are based on the resource efficiency that comes from higher density development. For example, individuals living in multifamily housing consume less land and energy than residents of less compact development. Similarly, when new development can be strategically integrated into walkable communities with transit access, multifamily residents also own fewer vehicles, require less parking, and generate less traffic congestion.

  For all these reasons, promoting multifamily development in appropriate locations is a hallmark of modern planning documents throughout the region, including the region's long-range plan, Connections 2045 Plan for Greater Philadelphia. For example, Connections 2045 identifies over 125 Centers: vibrant, healthy, mixed-use communities with walkable main streets and downtowns where future investment should be focused. Maximizing the potential of many of these centers will require thoughtfully integrating higher density development in the form of infill development, the rehabilitation and reuse of existing structures, and denser new development. In many contexts, new multifamily housing can reinforce the strengths of these Centers while helping to address the needs of a growing and changing population.

• Multifamily development remains controversial and is often difficult to construct

  Despite the growing demand for and potential benefits associated with multifamily housing, higher density development, including apartments, is often difficult to construct because of existing zoning and building codes that favor lower density development and segregated uses and opposition from the community.

  Public opposition toward apartments is typically motivated by the belief that new apartments will negatively impact a community or worsen the lifestyle of existing residents. Some of the most common objections to multifamily development are based on the following perceptions:

  • Multifamily development will lower the value of nearby single-family homes,
  • Apartments overburden schools, produce less revenue for local governments, and require more infrastructure to support,
  • Apartments create traffic congestion and parking problems, and/or
  • Apartment residents are less desirable neighbors who will bring conflicting backgrounds and values to the community.

  Many of the concerns about rental housing spring from negative attitudes toward density. As a concept, density is simply a measure for quantifying people or buildings or housing units in a given space. It can be calculated in many ways; however, the word itself often conjures images of overcrowding and congestion, tall buildings, greedy real estate developers, and lost parking spaces. These associations can derail conversations about development possibilities before they even begin.

  By design, multifamily housing concentrates population into a smaller area at a lower housing cost per person than other less dense housing forms. Accordingly, it is understandable to expect that multifamily housing might generate additional traffic and demand for public services relative to the area that it occupies when compared to other less dense housing types. However, discussing the potential impacts of a development proposal can be challenging due to a lack of data. Furthermore, much of the distaste for density may be based on outdated perceptions of apartments and persistent popular misconceptions about the relationship between density and community character. Where possible, this study has attempted to generate and gather accurate and up-to-date information that can help facilitate more informed conversations about the potential impacts of various development types.

In coordination with a study advisory committee consisting of representatives from each county and Core City in our region, DVRPC completed five research tasks designed to help our county and municipal planning partners better understand issues related to multifamily housing. This process, briefly described below, employed a combination of original research, data analysis, and literature review. In some instances, the full results of an individual task were summarized in an interim product that was shared with our study advisory committee. These products are listed as additional resources below.

• Conduct Developer Interviews

  DVRPC staff spoke with representatives from four local multifamily developers in February and March 2018: Radnor Property Group, J.G. Petrucci, Equus Partners/Madison Apartment Group, and CornerstoneTracy. DVRPC used these conversations to gather the perspectives and opinions of developers on several issues, including the audience for new multifamily construction in our region, the mix of units and amenities being included in new projects, and the experience of working with local municipalities.

• Summarize Academic and Professional Literature

  The questions and issues being explored in this study are not new. The potential impacts of various land use patterns have been studied by numerous academic institutions and practitioners around the county. Many of the most relevant documents and studies have been inventoried in an interim product entitled Multifamily Housing Impact Literature Review. Key findings from each study are organized according to three topics: economic, transportation, and community impacts. Although many of the studies discussed in this document focus on communities outside of our region, they provide relevant insights into planning and development issues in Greater Philadelphia.

• Document Multifamily Development Trends

  Multifamily housing represents approximately 32 percent of the housing stock in Greater Philadelphia. However, the distribution, age, and character of this housing stock differ significantly from place to place around the region. Furthermore, the multifamily housing that has been recently constructed is different from prior generations in significant ways. DVRPC provided a snapshot of the supply and production of multifamily housing in our region in an interim product entitled Multifamily Housing Research Summary. This document details multifamily construction activity in Greater Philadelphia and illustrates how multifamily real estate products have evolved over time. The primary data source for this work was CoStar^™, a subscription-based commercial real estate database.

• Generate Demographic Multipliers and Statistics

  Demographic multipliers and statistics play a critical role in the fiscal impact studies that local governments, school boards, and developers often rely on to inform land use and zoning decisions. In general terms, a residential demographic multiplier is the average ratio of a demographic measure per household or per housing unit. Some of the most common multipliers include average household size and the number of school-age children.

  Similarly, demographic statistics estimate the distribution of demographic groups or characteristics by housing type. Together, these tools can be used to help gauge the potential impact of a proposed development by better understanding the household and individual characteristics associated with various housing types (single-family, townhome, multifamily), sizes (one bedroom, two bedroom, etc.), and tenure types (renter-or owner-occupied). For the purposes of this study, some of the most relevant demographic statistics include age cohort, educational attainment, income, and means of commute.

  As part of this study, DVRPC sought to generate a series of geographically specific, up-to-date multipliers and statistics for various multifamily housing unit types in Greater Philadelphia. After a competitive selection process, DVRPC selected Econsult Solutions, Inc. (ESI) to conduct this work. ESI generated demographic multiplier and statistics for this study using data derived from the 2007–2011 and 2012–2016 5-Year American Community Survey (ACS) PUMS datasets. Information on the methodology used to develop these demographic multipliers and statistics can be found below.

  The complete list of demographic multipliers and statistics is discussed in Multifamily Housing Research Summary. The multipliers and statistics are also available as a digital spreadsheet.

• Observe Multifamily Travel/Travel Observations

  Finally, DVRPC sought to investigate the travel behavior of multifamily residents by generating vehicular trip generation rates for recently constructed multifamily properties throughout the region. This local data was collected to help planners and elected officials better understand the travel impacts of multifamily development projects in our region and help supplement data available in the Institute of Transportation Engineers (ITE) Trip Generation Manual. To generate these rates, DVRPC used video cameras to collect traffic data at 17 apartment complexes in a variety of land use contexts. Daily and AM peak hour vehicular trip generation rates were calculated for each site using occupancy rates derived from the CoStar™ commercial real estate database for each property at the time of observation. The results of this analysis are summarized in a memo entitled Multifamily Trip Generation Research and further discussed in Local Trip Generation Adjustments for Transit-Oriented Development.

The research conducted for this study was gathered prior to the COVID-19 pandemic. While the relative density of many apartment buildings is central to the benefits they can provide, this density may be viewed, in the short term at least as a potential liability. Some may suggest that multifamily buildings, which typically include shared spaces and elevators, are more susceptible to contagion than other types of buildings. However, many observers suggest that crowding within individual housing units may have played a more critical factor in how the virus spread through metropolitan areas than the overall density of housing units themselves.

There is still much to learn about the spread of COVID-19 and developers and municipalities will need to take heed of the potential long-term implication of the pandemic. For now, that may mean delaying any big development decisions due to economic uncertainties and public health considerations. This pause creates an opportunity for cities and towns to think in new ways. In the longer term, it is important to remember that responses to and innovations driven by past pandemics have helped to shape the built environment in meaningful ways. Lessons being learned today will help to inform the planning and design of future buildings and the maintenance and rehabilitation of existing buildings in ways that may be difficult to foresee right now.

Despite this uncertainty, the demand for apartments is already well established and will not go away, even with a pandemic. Planners, architects, and municipal officials will need to ensure that future development projects can maximize the smart growth benefits of multifamily housing while ensuring the health, safety, and wellbeing of residents.