$1.1Trillion Apartment Industry Produces Lasting Economic Impact
Representing the National Multi Housing Council (NMHC) and the National Apartment Association (NAA) before a House Energy and Commerce Subcommittee, Tom Bozzuto, chairman and CEO of the Bozzuto Group, highlighted the economic strength of the apartment industry in front of Congress on June 4, 2013.
Citing findings from the “The Trillion Dollar Apartment Industry” report, a study conducted by Stephen S. Fuller, Ph.D., of George Mason University’s Center for Regional Analysis, in partnership with the NAA and NMHC, Bozzuto testified how the apartment industry and its 35 million residents contribute more than a trillion dollars to the national economy.
The Economic Impact of Apartments
According to Bozzuto’s official statement to Congress (available here), new apartment construction is a significant driver of job creation and spending. While the economic downturn resulted in a large decline in multifamily building, new apartment groundbreakings began to trend upwards by mid-2010.
“According to Dr. Fuller’s report, this construction activity produced $14.8 billion in spending, and had a total economic contribution of $42.5 billion, “noted Bozzuto. “Further, this apartment construction spending generated $12.7 billion in personal earnings and supported nearly 324,000 jobs in 2011. Most of these jobs were directly supported by apartment construction, including 121,000 on-site positions held by framers, electricians, plumbers, carpenters and various other trades.”
Additionally, the economic effects of apartment buildings extend far beyond the initial construction period by generating permanent jobs and tremendous spending related to ongoing property operations and maintenance.
“Beyond the routine needs of keeping a building operational, apartment firms invest annually in property repairs and improvements to attract and retain residents in a competitive environment. The multifamily industry spends nearly $70 billion on apartment operations every year. That spending generates a total economic contribution of $182.6 billion according to Dr. Fuller, and supports 2.3 million jobs annually.”
The Potential for Further Economic Impact
Despite the significant economic impact the multifamily industry has on the American economy, there is still tremendous opportunity for further growth.
“Demand for apartments continues to grow and half of all new households formed this decade are expected to rent,” noted Bozzuto. “With 77 million Baby Boomers who may consider downsizing and nearly 80 million Echo Boomers beginning to enter the housing market, Harvard University research suggests that up to 7 million new renter households will form this decade.”
And yet, the supply of apartment units is failing to meet this demand. According to Dr. Fuller’s report, an estimated 300,000 to 400,000 apartment units must be built each year to meet demand. However, only 158,000 apartments were delivered in 2012, which is not enough to even replace the units lost annually through demolition, obsolescence, and conversion.
“The nation is facing a shortage of multifamily homes,” said Bozzuto. “This shortage is particularly acute for low- and moderate-income households. The Harvard Joint Center for Housing Studies estimates a nationwide affordable housing shortfall of 5.1 million units.”
Despite the shortfall, the apartment industry is ready to deliver.
“The apartment industry can be a robust economic engine that provides lasting job growth and spending nationwide,” Bozzuto added. “With up to seven million new renter households forming this decade—almost half of all new households—the dollars and jobs we add to the economy will only grow in magnitude.”