Albany's apartment boom matches up with some national trends

park south redevelopment mixed-use

Apartments going up in the Park South redevelopment project.

The city of Albany is currently experiencing a mini-boom in new apartment projects, as both old buildings are being redeveloped and new buildings are being constructed.

The agenda for the planning board meeting this month (Thursday night) alone includes five large projects that include residential. Those projects represent more than 700 new apartment units.

These projects -- and others like them -- have gotten all sorts of responses from people, ranging from enthusiasm to opposition. If anything, though, it seems there's just a lot of skepticism about what's going on. Why so many apartments? Why are they so expensive?

It turns out that a lot of what's happening in the city of Albany fits in with some broader national trends. That's one of the things we took from a new report out this week, which includes a bunch of interesting bits that shed some light on Albany's apartment boom.

The report

The report -- America's Rental Housing 2017 -- is from the The Joint Center for Housing Studies at Harvard. It's online if you'd like to read it (see that link), in both summary and detailed forms.

We've clipped a few sections from the executive summary below and added a few bits about Albany specifically from new Census data recently released.

By the way: The report concludes that the big upswing in demand for apartments around the country over the last decade is slowing and may even be flattening out.

There are more high-income renters

The sweeping changes in the nature of rental demand, however, seem likely to persist. In particular, renting now appears to have greater appeal for households that could afford to buy homes if they desired. In 2006, 12 percent of households earning $100,000 or more were renters. In 2016, that share exceeded 18 percent, a cumulative increase of 2.9 million renters in this top income category. Indeed, these high-income households drove nearly 30 percent of the growth in renters over the decade. Even so, renting remains the primary housing option for those with the least means. A majority (53 percent) of households earning less than $35,000 rent their housing, including over 60 percent of households earning less than $15,000.

The portions don't break out quite like that in the city of Albany, but the number of high-income renters has been increasing. The percentage of all renting households in the city with incomes greater than $100k was a little more than 6.68 percent in the 2016 American Community Survey 5-year estimates.* It was 4.3 percent in the 2011 5-year estimates. That's a difference of roughly 700 households.

There are more older renters

In addition, renters are now much older on average than a decade ago, reflecting both an increase in middle-aged households that rent and the overall aging of the population. The median age of renters thus increased from 38 in 2006 to 40 in 2016. Although roughly a third of renters are under age 35, nearly as many are now age 50 and over.

For whatever reason, we couldn't pull the median renter age for Albany from the Census. (If you can, please share.) But this does roughly match with up we've heard from developers building these new apartment complexes, that they're being rented by younger adults and "empty nest"-type households.

People with kids are renters

With renting more common across age and income groups, renter households are more representative of the broad cross-section of US families. Most notably, families with children now make up a larger share of households that rent (33 percent) than own (30 percent). Married couples without children, in contrast, make up 37 percent of homeowners and just 12 percent of renter households. Single persons are still the most common renter household type, accounting for fully 37 percent of all renter households.

This trend doesn't hold true for Albany. Households with children made up 19 percent of households in owner-occupied housing in the 2016 five-year estimate, and 18 percent of households in renter-occupied housing.

But it is interesting that both owner-occupied and renter occupied housing in the city have about the same rates of households with children -- something to keep in mind when people talk about the idea of "family neighborhoods" when referring to types of housing.

Cost-burdened renters

The high incidence of cost burdens reflects the divergent paths of rental housing costs and household incomes. Between 2001 and 2011, median rental housing costs rose 5 percent in real terms while median renter incomes dropped 15 percent. Since 2011, however, real housing costs have increased 6 percent while income growth has picked up 16 percent (due in part to the increasing share of renters with higher incomes). But even with the recent turnaround in incomes, the cumulative increase in rental housing costs since 2001 has been far larger.
The rental market thus appears to be settling into a new normal where nearly half of renter households are cost burdened. ...

And that's the case in the city of Albany, according to the 2016 five-year estimates. Approximately 52 percent of renters were paying gross rents that were 30 percent or more their household income. (The figure was about 45 percent for the Albany-Schenectady-Troy metro.)

The report goes into some of the complicated issues related to providing affordable housing, and concludes that "the current level of rental housing assistance is grossly inadequate."

Looking to the future

One more clip from the report, which we thought was interesting, especially the part about adding new, affordable housing:

Slower growth in rental housing demand could be good news if it helps to check the rapid rise in rents. But even if the homeownership rate stabilizes near current levels, the number of renter households is likely to continue to increase at a healthy clip, driving up the need for additional supply. And given that a broader array of households has turned to renting, this also means a growing need for a range of rental housing options.
With the divergence between housing costs and household incomes after 2001, cost burdens are a fact of life for nearly half of all renters. The lack of affordable rental housing is a consequence of not only strong growth in the number of lower-income households, but also steeply rising development costs. The complex set of forces driving these increases includes the escalating costs of inputs and a lack of innovation in production methods, the design of homes, and the means of financing housing. Addressing all of these challenges requires action on the parts of both the public and private sectors. Government at all levels has a role to play in ensuring that the regulatory environment does not stifle much-needed innovation, and that tax policy and public spending support the efficient provision of moderately priced housing. Industry has its own part to play in fostering and advancing new approaches.

____

* We're using the 2016 ACS 5-year estimates throughout this post because their margins of error are smaller than the 1-year estimates. The tradeoff is that the 1-year estimates are more up to date. So the 5-year estimate may represent a lag.

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