More tools are needed to encourage the financing of small and medium multifamily housing (SMMF) properties, urges a new study.
Although large high-rises often come to mind when thinking about today’s apartment buildings, developments with two to 49 units are a more common and valuable source of housing in the country, according to Understanding the Small and Medium Multifamily Housing Stock, a report by Enterprise Community Partners and the University of Southern California Bedrosian Center on Governance.
SMMF properties play a significant role in the housing market, making up an impressive 54% of the nation’s rental housing stock. Ubiquitous throughout the United States, they account for 21% of the overall housing stock and house 22% of the total population.
Small and medium properties are especially critical in housing the nation’s poorest residents. While they account for 21% of the national housing stock overall, they have more than 55% of all subsidized units, reveals the report.
“These are the properties that are affordable because they are subsidized, and by and large they are also the heart of the naturally occurring affordable stock,” says Andrew Jakabovics, vice president, policy development, at Enterprise. “Rents particularly to the smaller end of the small to medium stock are far more affordable.”
Researchers found that buildings with two to 19 units house the most low-income households. Among renters with the lowest incomes—those making less than $10,000 annually—60% live in SMMF.
What’s concerning is that fewer smaller apartments are being built, and SMMF properties on average are much older than large multifamily buildings, says Jakabovics, one of the report authors.
Financing and regulatory barriers may be among the reasons why more smaller developments are not being built. The report calls for SMMF production to be simplified and expanded.
“Streamlining regulations to expand the supply of smaller buildings can improve longer-term affordability,” says the report. “SMMF properties have exhibited a greater likelihood of becoming more affordable as they age than other building categories, so the relative lack of new construction over the past few decades may indicate future challenges to the supply of market-rate affordable units.”
They report calls for more tools to encourage the preservation and financing of SMMF properties.
“Due to the age of this segment of the housing stock, preservation requires investment, but existing financing tools don’t easily work for smaller properties seeking to retain more affordable rents,” says the study. “Developing and funding tools that encourage preservation of affordable SMMF is critical to protecting these underappreciated sources of affordable housing.”