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Challenges Arise For New Apartment Construction

Housing continues to be largely impacted by the pressures of the COVID-19 public health crisis. The industry’s growing list of regulatory requirements, coupled with a shaky national recovery, further exacerbate the pandemic’s strain on the U.S. housing stock, its providers and its renters. It should come as no surprise that new apartment construction has experienced a 12 percent decline since 2019, according to a new report from RENTCafé and Yardi Matrix.

By all accounts, lenders are ready to provide the financing needed for new rental housing. Residential development, compared to commercial development, is considered a less risky investment due to the many work-from-home policies now put in place by employers. But COVID-19’s lingering economic and social uncertainty has dogged developers and owners for months, halting existing development and preventing new starts. Construction moratoria and public health guidelines have extended project timelines, raised construction costs and deprived markets of much needed housing. Renters are leaving big cities to limit COVID-19 exposure, signaling a migration from urban communities to less dense suburban neighborhoods

However, spending on residential construction has seen a small uptick since July. Whether or not this upward trend persists, the industry will need to contend with a new standard in multifamily development.

Changing Work Patterns

To contend with COVID-19’s barriers to development, sites have had to enact certain mitigation strategies for construction crews. This has included staggering work shifts and utilizing new technologies to support fewer employees onsite. Naturally, developers must account for the adoption of these new processes, which extend project timelines and delay entry to market.

Developments are further delayed due to closures of local zoning and building departments, pushing back critical permitting and inspections. To curb the impact of these closures, jurisdictions have implemented video inspections that allow building officials to remotely assess construction sites. In Goleta, Calif., city building staff have fast tracked the use of remote video inspections and established processes for the electronic submission of new building plans. Building officials in Miami County, Ohio, are using similar remote video technology to conduct site inspections.

Changing Lifestyles

COVID-19 has flipped the script on how renters engage with their housing. Now, more than ever, renters are seeking spaces that actively mitigate the spread of the virus. This will require larger common areas like lobbies, pools and gyms that can accommodate heavy foot traffic while maintaining social distancing guidelines. High touch surfaces found in elevators, entranceways and meeting spaces will be replaced by contactless alternatives.

Individual dwelling units will also need to reflect the shift to work-from-home. Floorplans may include in-unit “office space” that will incorporate factors like reduced noise levels, internet connectivity and access to natural light.

Given the amount of time residents now spend in unit, developers have also seen a greater demand for “healthy” amenities like high quality ventilation systems to improve the quality of indoor airflow and access to energy efficient appliances like washers and dryers, motion sensor lighting and touchless faucets.

The construction delays caused by COVID-19 and the growing needs of renters will inevitably result in higher housing costs and a deepening of the affordability gap, requiring far greater housing starts than those already in progress. Yet balancing the safety, affordability and financial viability of housing will be the keystone issue for post-COVID-19 development. It will be critical that housing providers, renters and lawmakers at all levels of government come together to ensure that new housing is both quality and achievable.