From file "078_r1_ps_hws" entitled "MMTTRS06.qxd" page 01
From file "078_r1_ps_hws" entitled "MMTTRS06.qxd" page 01
From file "080_r1_ps_hws" entitled "MMTTRS06.qxd" page 01
From file "080_r1_ps_hws" entitled "MMTTRS06.qxd" page 01

To develop the nearly 8,000 affordable and subsidized multifamily units he has under construction in 27 states, Robert Greer, president of Michaels Development in Marlton, N.J., must jump through what seems like an endless number of hoops to secure financing, garner political and neighborhood support, and comply with myriad regulations for appropriate use of public funds. And that's before he's given much, if any, thought to what he'll need in terms of building materials.

Despite the hurdles (set higher, he says, by the lack of federal funding for affordable housing programs), Greer knows that demand for below-market-rate rentals is nearly insatiable. “There's no place I could build that doesn't have enormous demand for this [type of housing],” he says.

While the need for affordable rental and for-sale housing is clearly acute, all types of multi-family housing are in healthy demand. Whether subsidized or market-rate, rental or for-sale, newly constructed or condo conversions, the multifamily realm is enjoying an unprecedented 10-year run of stability. New starts are averaging nearly 350,000 units annually since 1997 and are forecast to cross the 400,000-per-year barrier within five years—the most since 1988—while avoiding the overbuilding that tanked the industry in the early-1990s.


A closer look at the numbers, though, reveals distinct differences among the various segments within multifamily development. As low interest rates drove single-family homeownership during the past decade, those favorable terms also boosted the for-sale new and converted condo side of the market; as more renters leapt on the ownership bandwagon, the development of new market-rate apartments dwindled, while those still left out of the loop gravitated toward subsidized rentals.

Now, as interest rates have started to rise and mortgage terms tighten, there is renewed demand for middle-income, market-rate rental housing at the expense of for-sale projects, including a reversal of the conversion trend from condos to leased units. “The prospects are strongest for those [developers and builders] who can serve the middle-income, generally young, market,” says Michael Carliner, an NAHB economist.

In addition, Carliner senses another oncoming shift in the multifamily dynamic, predicting a decline among developments in the urban cores while those on suburban sites gear up in response to the most recent population trends tracked by the U.S. Census Bureau indicating a migration from major cities to the outskirts, specifically among couples and young families.

That's generally good news for LBM dealers serving builders, general contractors, and specialty trades working in the multifamily realm, as suburban for-sale multifamily and rental housing projects are typically low- and mid-rise buildings—and thus can utilize wood-based structural products. In the city, projects are usually five-plus stories (and often much taller), utilizing code-required concrete and steel structural materials, among other commercial-grade products not typically stocked or sourced by LBM dealers.

But the opportunities for dealers go well beyond structural systems and apply to almost any multifamily building or conversion project. Developers are faced with several challenges—notably compliance with federal fair housing regulations, increasing tenant sensitivity to noise between units, latent defects caused by moisture infiltration, and, as Greer knows all too well, providing a higher standard of housing for lower-income households—all of which present opportunities for dealers to sell and service materials and forge lasting relationships in the multifamily sector.

Fair Housing Compliance In varying degrees, stipulations or sections within both the federal Fair Housing Act (FHA) of 1991 and the Americans with Disabilities Act (ADA) of 1991 require housing projects of four or more dwelling units to be accessible to anyone, regardless of any physical limitations.

That legalese translates to building features such as entrance ramps, handrails, wider door openings (and thus wider doors), and structural reinforcements for grab bars in bathrooms. “Accessibility rules apply to both the individual units and all of the public spaces within the building or development,” says Barry Johnson, a senior engineer for the International Code Council (ICC), which offers both online and in-person workshops to help builders comply.