Traditional homebuilders add multifamily projects to portfolios

Buck Swaney believes high-density, multifamily developments contribute to thriving urban centers, reduce sprawl and provide more cost-effective housing options for the public.

Be that as it may, the Utah-based land developer – who is expanding into Eastern Idaho to capitalize on the state’s strong current building market – is accustomed to heated battles with neighbors who pack local planning meetings whenever he pursues a project.

But Swaney insists the benefits of multifamily developments far outweigh any zoning headaches in the current business climate, in which land is becoming scarcer and labor and material costs continue to rise.

Swaney is one of many Idaho construction industry officials who continue to build single-family homes amid a building boom but have begun placing greater emphasis on adding multifamily projects to their portfolios. He sees a growing niche for multifamily units, which use land more efficiently and appeal to tenants who don’t want to be tied down by a home, or aren’t in a financial position to buy one.

Swaney said opponents commonly object that multifamily developments will create traffic congestion or that they represent a lower-value land use.

“This is the development battle front in the Western U.S.,” Swaney said, reasoning people need homes and “either you accommodate them in an efficient high-density context or sprawl into another place.”

On June 2,  Swaney participated in a ribbon-cutting ceremony for the large Northgate project in Pocatello. He’s one of two developers involved in the public-private partnership, which could eventually include a few thousand new homes – a mix of single-family and multifamily construction – a business technology park, a new medical complex and light retail space. Home construction will commence in the coming weeks. Swaney said the project is being built on a large “island of open space” and hasn’t been met by the usual neighbors’ concerns.

Swaney also believes perceptions have begun to improve regarding multifamily homes, especially among millennials, who tend to move frequently and appreciate the convenience of rentals, with no lawns to water or home repairs to make.

“There’s a stronger acceptance of (multifamily homes) than any past era until now,” Swaney said.

Paul Smith, executive director of the Idaho Apartment Association, agrees with Swaney’s assessment that multifamily homes fit well with the needs of millennials, who like flexibility and amenities offered in rental complexes but hope to avoid yard work.

“Developers have found the demand for new housing units is for multifamily because the millennial generation has different housing preferences,” Smith said. “They don’t trust or want home ownership as much as their parents did.”

The housing supply is tight throughout Idaho. Swaney noted Pocatello has fewer than 175 single-family home listings on the market but is bracing for the addition of 350 jobs soon from an expansion of its FBI center, alone.

The Boise area is the state’s fastest-growing region, and has been a national hotbed for construction. Ada County has added more than 2,000 new apartments during the past two years, according to the Idaho Apartment Association.

“We’re hovering around 97 percent occupancy. That is pretty good,” said Corey Barton, owner and president of CBH Homes in Boise.

Barton continues developing single-family homes, but has been ramping up his multifamily projects as a “natural progression.” Barton said his company is now building 40 fourplex units in Kuna, ranging from $140,000 to $170,000 per unit. The units vary from a single bedroom and bathroom to three bedrooms and two bathrooms, with the mid-sized units averaging about 1,000 square feet. He’s built eightplexes in Treasure Valley and recently sold a project with 40 fourplex units, in 10 buildings.

Barton believes an influx of residents moving in from other states and a lack of affordable single-family housing is driving demand for multifamily units.

“We’ll be doing more multifamily in the future,” Barton said. “We’ve got several projects in the approval process.”

Steve Arnold, a project manager and Realtor with Boise-based A Team Land Consultants, said land values are rising faster than home values, making it more difficult for developers to earn a significant margin on single-family homes. And while investors who buy multifamily developments prefer standardized construction, Arnold finds builders spend hours in meetings with single-family home buyers to tweak plans to their individual tastes.

Arnold has built about 800 multifamily units in Treasure Valley during the past eight years.

“I’ve got probably 500 to 600 multifamily projects going right now,” Arnold said. “I can’t build them fast enough.”

Dave Scaggs, owner of Summit Development in Boise, has been building multifamily homes for 24 years and said he’s been taken aback by the sudden increase in competition within the category. Scaggs, who spent a decade working in California’s building industry after high school, believes the current building trend in Treasure Valley rivals the Golden State’s past building boom.

“Look around in town. It’s everywhere,” Scaggs said. “I was told a long time ago, when everybody else jumps in, it’s time to get out.”

Scaggs believes a tight land base and a tripling of area land prices during the past five years have caused more builders to look toward multifamily construction. But he agrees builders have a long way to go before they saturate the market.

“There are a lot of monster complexes coming in – big complexes from what I hear,” Scaggs said.