Construction of large-scale apartment buildings is breaking records. Will Cincinnati and Dayton welcome the additional housing?
Cities that want to add hundreds of housing units at a time are embracing the addition of large-scale apartments. 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?
Record-breaking construction
For the first year in history more than 500,000 new apartment units are projected to come online in 2024. That’s thirty percent more than 2022, as demand for rental apartments continues to outstrip supply. And according to RentCafe and its commercial real estate market data company Yardi Matrix, despite uncertainties there will likely be a couple million more units in the next four years.
Credit: Yardi Matrix
Driven by developers in a favorable economy, the focus has been on high-end apartments in the last five years. This is where they see a margin to make money. RentCafe cautions that because most are luxury apartments, “combined with the concentration of new units in the largest U.S. cities that means that renters in smaller markets may continue to have limited affordable options.” In the first half of 2023, a record number 200,000 high-end apartment units were built compared to the previous six-month record of 25,000.
Credit: Yardi Matrix
One reason for the record-breaking apartment numbers is three years ago when interest rates were lower, the housing gap continued to grow and supply hadn’t kept pace with demand, developers saw an opportunity. Those apartments are now ready to open.
Cincinnati
Yardi Matrix Manager of Business Intelligence Doug Ressler says in 2024 Cincinnati will be Ohio’s second biggest builder and 32nd nationwide, welcoming 3,700 apartment units this year. Half of those are in the city limits. From 2024-2028 Greater Cincinnati, including Lebanon, Mason and West Chester, is projected to add 10,035 apartment units.
According to the Blume Community Partners who compiled Hamilton County data, just six percent of the housing stock is large multi-family buildings (50 units for more) and of all the units built since 2000 in Hamilton County, only 14-percent are in large multi-family buildings. In Montgomery County, according to Brick by Brick’s calculations from figures the auditor’s office provided to us, it’s 8-percent.
Dayton
Greater Dayton is on track to open 564 units this year, 320 of those in the city proper. Through 2028 Ressler projects Metro Dayton will add 2,140 units including Huber Heights, Trotwood and Kettering. However, when compared to apartment construction between 2019 and 2023, the Dayton area is expected to see the second highest decrease or 41-percent less (1,546 units).
A tale of two developments
Anderson Township (Hamilton County)
The Hamilton County community of Anderson Township is not where you would expect apartments to be built. The Cincinnati suburb boasts 20-percent of its land is green space and most of the population live in single-family homes.
But Assistant Township Administrator Steve Sievers says the community is trying to diversify its housing stock and resident base after a series of housing needs assessments that showed a need for more apartments and senior living units.
He says, “Having a homeownership rate of 87-percent or 90-percent and 90-percent of our housing units being single family detached, has been really strong but that’s not where the future is going.”
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.
In the last four years the township has added more than 700 luxury apartment units.
- The Vantage (224 units)
- Skytop (361 units)
- One30 at Stonegate Apartments (182 units)
Sievers says many of the people moving into The Vantage previously lived in Anderson Township and have downsized.
Brick by Brick’s Hernz Laguerre Jr. looked into who is moving into Greater Cincinnati apartments and found the reasons vary.
Bond Hill (Cincinnati)
Bond Hill’s Villages of Daybreak development, established in 2004, will soon grow by 150 apartment units. It currently consists of 300 single-family homes and a 4.3-acre lot that has been vacant for twenty years.
Louisville-based LDG Development plans to build Seymour Station, two apartment buildings at 1931 Seymour Avenue. The $45M project was approved by Cincinnati City Council on September 11, 2024, despite opposition from Villages of Daybreak single-family homeowners.
These would be affordable apartments, for those making 50 to 70-percent of the area median income. 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.
On September 10, Mary Hall told Cincinnati Council’s Equitable Growth and Housing Committee that she paid $300,000 for her home at Villages of Daybreak and wants it to be worth $400,000 some years from now. “Generational wealth, we’re protecting our wealth. We’re protecting our roots, please save them.”
Based on some of the Bond Hill neighbors’ 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 property values increased.
Cincinnati Councilmember Meeka Owens says she is happy to support the Bond Hill development. “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. “
Where are the most large-scale apartment units coming online?
Multi-family buildings account for 41-percent of new housing, the highest level since 1985, according to Construction Coverage.
Source: Construction Coverage analysis of U.S. Census Bureau American Community Survey and Building Permits Survey data | Image Credit: Construction Coverage
However, cities and states vary when it comes to the percentage of multifamily units they have. The national average is 28 percent of housing stock, although it varies greatly among states. For example, New York State has the highest proportion of multi-family housing at 52-percent. While West Virginia, Idaho and Mississippi have less than 17-percent of the existing housing stock comprising 17-percent.
Benefits of large-scale apartments
LBM Journal, serving the lumber and building materials industry, lists at least four reasons why building more large-scale apartments is good.
- Increases Density
- Creates housing in urban and suburban locations
- Is more efficient
- Is cost effective
Another benefit of large-scale apartments is it helps hold rents down.
Rents declined in the Southern and Western markets, led by Austin, Texas, Jacksonville, Florida and Atlanta, Georgia, all due to new apartment construction, according to the RealPage Analytics Blog.
According to the Pew Charitable Trusts which studied Minneapolis from 2017-2022, the city increased its housing stock by 12-percent while rents grew by just 1-percent.
During this same period, the rest of Minnesota added 4 percent to its housing stock and rents went up by 14 percent.
And the real estate company CoStar studied the largest 150 U.S. metro areas by apartment inventory and found Myrtle Beach, South Carolina recorded the highest rate of deliveries in the third quarter of 2023, 21-percent. Rent decreased there by 4-percent. Other cities seeing rent drop are Huntsville, AL, Provo, UT, Sarasota, FL, Lakeland, FL, Olympia, WA, Sioux Falls, SD, Ogden, UT, Pensacola, FL and Boise, ID.
The Midwest and Northeast continue to lead the nation in rent growth. Cincinnati, Cleveland and Columbus all recorded increases of between 2.7 and 3.4 percent.
From August, 2024:
Credit: CoStar
Filtering
Everyone can benefit from additional housing even if only one type is built, says Notre Dame researcher Evan Mast. It’s called “filtering.” This is where newer housing frees up older, less expensive housing in what Mast calls a “migration chain.”
Mast says for every one-hundred new market-rate apartments, fifty vacancies are created. So even if most of the new apartments are luxury, housing options at all levels will open as people move out of their old places.
Appeal, land scarcity and rising costs
Luxury-apartment renters often don’t want to give up the amenities they had in their previous home and want to remain in the same area as family and friends. Others don’t have enough for a down payment on a house but want high-end living in an apartment. Developers also say building large-scale apartments is the economy of scale. Land is scarce and building materials are expensive, so why not save money by increasing the production of units?
Drawbacks and Limitations
As with complaints from Anderson Township and Bond Hill residents, many people say large-scale apartment units will lead to a surge in population, can strain existing infrastructure leading to traffic congestion, and access to services and schools. Assistant Anderson Township Administrator Steve Sievers says One30 at Stonegate did not lead to these things and only increased the number of students in the Forest Hills School District by a couple of kids.
Beyond community resistance to large multi-family, there are other challenges to creating this housing. At the top of the list of complaints from developers is the red tape. Forty-one percent of multi-family development costs are related to regulation, according to the National Association of Home Builders.
Other limitations include:
- Exclusionary Zoning – the zoning code excludes certain types of land uses in a community.
- LIHTC (Low-Income Housing Tax Credit), which is used to help subsidize the creation of income-restricted housing units, falls short of the country’s needs and lawmakers have called for an expansion. CNBC reports from 1987-2020 the housing units created with LIHTC totaled 3.44 million (built or preserved).
- Transit-oriented development creates the best outcomes but it’s costly and difficult to build over metro lines (in big cities) and create deep foundations for underground parking. Note: Cincinnati hopes its recent reduction in required parking, passed as part of Connected Communities policy reforms, may help developers with this issue.
- The economic climate is expected to turn, leading to fewer large-scale apartment projects in the next few years. After a downturn, Yardi Matrix predicts an upturn again in 2028.
According to Daniel McCue with the Joint Center for Housing Studies at Harvard, “Completions are still rising or still pretty high but that stuff that was permitted two, three, four years ago; it’s kind of a big train that has to turn and right now that train is headed south.”
Looking ahead
At least when it comes to skyscrapers, Tim Safransky who wrote The Rise of Mega-Apartment Buildings in US Cities: A Trend with Complexities, communities and developers need to do careful planning and have a data-driven approach.
He says they must prioritize infrastructure investment, mixed-use development, affordability and community engagement, so that cities can ensure mega-apartment buildings contribute positively.
Many will be watching the political climate. Several federal and state programs have a significant impact on multi-family housing development.
And, according to Yardi Matrix’s 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.”
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Ann Thompson – Host, Producer
Over the last thirty years in Cincinnati, Ann Thompson has brought a wealth of knowledge and expertise to her reporting. She has reported and anchored for WVXU, WKRC, WCKY, WHIO-TV and Metro Networks and freelanced for NPR, CBS and ABC Radio. Her work has been recognized by the Associated Press and she has won awards from the Association of Women in Communications and the Alliance for Women in Media. She is a former News Director and Operations Manager. Ann has reported from India, Japan, South Korea, Germany and Belgium as part of fellowships. Ann thinks of the Brick by Brick project as “journalism for good.” She serves as host and producer. Ann lives in Anderson Township with her husband Scott. They have two boys. Jake graduated from the Air Force Academy in 2022 and Kurt attends West Point.
