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The challenge for multifamily developers: Meet our economy’s complex demands

No matter where the real estate conversation starts, it always seems to turn to the subject of multifamily housing.

There’s just so much to talk about. First, there’s the fact that so many people who used to live in single-family homes are now moving into apartments. This is a national trend, but it’s especially noticeable in Idaho, which traditionally hasn’t been a place with a lot of apartment-dwellers. With land and housing so inexpensive, there’s just never been a need until now.

Living in an apartment has also suddenly become more socially acceptable. Outside of major cities, multifamily was once considered the domain of the young and penniless, or at least those with limited incomes. Now the groups with more money accumulated – such as the baby boomers – are giving it a go. The apartments being built these days are not designed for people with modest incomes; instead, they contain amenities like granite countertops, access to dedicated outdoor space and the high ceilings once seen only in high-end homes.

Rents for these fancier apartments are rising accordingly. Any home-seeker who is lucky enough to find a unit to rent is going to find that rents have jumped significantly in recent years. Apartment List, an online apartment marketplace, gives Idaho a No. 13 ranking in rent growth rate. Of course, the state started low and it is still only at No. 36 nationwide for its median rent. In Idaho, the median rent for a two-bedroom apartment was $762 in 2015, and it rose to $834 for that apartment in 2018.

Meanwhile, there’s a critical apartment unit shortage, unless you have enough money to pay for the new Class A-type buildings just now coming online, like the Arboretum in east Boise or the Fowler downtown. The Fowler is sleek and modern and expensive, with studio apartments starting at $950; at the Arboretum, they start at $1,120. The Fowler is filling up slowly; its managers said in May that it was about 60 percent rented.

With more affordable units, demand far outstrips supply. At a Title One forum on commercial real estate at Zions Bank June 14, Jessica Meade, the Title One team leader in Twin Falls, said the inventory shortage is as acute in Twin Falls as it is in the Treasure Valley. She spoke of a developer she knows who is building a multi-unit complex and has a waiting list already.

“A one-bedroom is $900,” Meade said. “You can buy a house cheaper if you can find one to buy.”

With builders responding as fast as they can, there is a torrent of new multifamily housing projects underway around the state. Some take the form of conventional apartment buildings; others are the type of fourplexes and eightplexes that more easily fit into an area, like the Barber Valley, that has a mix of single-family homes and retail.

In Kootenai County, one of the fastest-growing counties in the state, there’s a 1.8 percent residential vacancy rate, according to Jim Pierce, a Title One VP in Coeur d’Alene who also spoke at the June 14 forum. Affordable housing is a problem there as well. While developers are putting up multifamily buildings as fast as they can, a lot of it is the high-end housing geared toward the baby boomers who can afford it, Pierce said. Two-thirds of the newcomers to Coeur d’Alene are 65 and over.

The housing shortage has reached a crisis point in Sun Valley, where prices have risen 16 percent in Blaine County since 2017. Workers commute for hours from places like Twin Falls, Jerome and Shoshone every day. However, multifamily development hasn’t taken off there – although the school district is considering a plan to build workforce housing for its staff.

“Realtors post on our MLS site probably 10 to 12 times a day in need of rental units,” said Gary Maxwell, who works for Title One in Blaine County.

One result of all this interest in apartments is that self-storage is also a booming industry. Pierce, of Coeur d’Alene, said the self-storage industry growth there is constrained only by limits on labor and land. Developers are building 60,000 to 80,000-square-foot storage units with on-site staffing, and are taking reservations before they’re finished, Pierce said.

Another result: policymakers are paying attention to the need for affordable housing. It’s a huge issue for employers, and it’s also a life-changing problem for the individuals and families who cannot find a place to call home. Several Idaho cities are changing their zoning codes to encourage affordable housing, and others are looking at other incentives. Some developers are using federal tax credits to build projects in Boise, Kuna, Caldwell and Nampa.

In the July 13 edition of Square Feet, our real estate and construction quarterly, our reporters talk to some of the builders and policymakers who are taking action in the housing arena. IBR staff writer Sharon Fisher discusses some of the obstacles and solutions in the affordable housing market, and staff writer Teya Vitu talks about some of the dozens of multifamily projects underway around the state. It’s an interesting moment in time for housing in Idaho and elsewhere, one that reflects broad changes in how we live, work and enjoy our surroundings.

Anne Wallace Allen is editor of Idaho Business Review.

About Anne Wallace Allen

Anne Wallace Allen is the editor of the Idaho Business Review.

One comment

  1. jordanmorales@boisestate.edu

    Barber Valley residents shot down 100 units recently because apparently they wanted forty $400k-$900k single family homes. Sad and selfish when you see the low supply of apartments and what it’s doing to our low and middle class. My apartment from 2011-2013 on Orchard was a tiny one bedroom renting for $500/month. We no longer live there but I recently looked it up out of curiosity, it’is now $750/month.
    This affects all of us regardless of class too. ACHD commissioner Hansen’s mother lives in the Terraces at Barber Valley. He noted that in talking with a couple of her caretakers, they commute in from Canyon County. That’s extra vehicles on the road causing traffic/pollution.