Where did all the small apartment buildings go?

[ChargerCarl]

Back in August, we wrote about the phenomenon of the “missing middle”: the fact that today’s urban (and suburban) development tends to take the form of either single-family homes or very large apartment buildings, but not so much in the middle.

And that’s a problem! Small apartment buildings perform a vital function in classic “illegal neighborhoods,” creating a stock of market-rate housing that is generally cheaper than houses, as well as adding crucial density to support walkable neighborhood commercial districts and transit, all at a lowrise scale that many people think “fits” with single family homes. After all, from triple deckers in New England, to two-flats in Chicago, to small apartment buildings in cities of all sizes all across the country, most popular older neighborhoods already include a large stock of these structures.

In our first post on the subject, we dug up statistics about the “missing middle” in metro areas around the country, using statistics from the last decade to show that extremely few homes are built in buildings that hold between two and four units.

But data from another Census report, the “2014 Characteristics of New Housing,” breaks down construction into more categories—and goes back all the way to 1972. Which allows us to see that the missing middle hasn’t always been missing.

In fact, back in 1972, nearly a third of all multifamily homes were constructed in buildings with two to nine units—a typical size for lowrise apartment buildings. Significantly fewer, about a fifth, were built in very large structures with over 50 units. Small apartments peaked in 1981, with 46 percent of all new multifamily units.

Since then, though, they’ve fallen off a cliff.

In 2014, just seven percent of new multifamily homes were in buildings with fewer than 10 units. But nearly half—48 percent—were in buildings with 50 units or more.

Don’t get us wrong. There’s nothing wrong with big residential buildings. They’re necessary, in fact, for creating very high density areas in and around central business districts, and in large or high-cost cities’ urban cores, where space is at a premium.

But most urban neighborhoods don’t need 50-unit buildings, and it’s hard to imagine overcoming the opposition to such development in currently lowrise communities. And while the reaction to Seattle’s HALA proposal suggests that even small apartments are going to be unwelcome in many single-family neighborhoods, there are plenty of neighborhoods that are already mixed, where adding housing two, five, eight units at a time could help keep up with demand and create a broader diversity of housing options. That’s important both for price diversity, and to make room for people to “age in place,” downsizing from large homes they can’t take care of any more without having to leave their neighborhood. If the only options are large apartment buildings or single family homes, that seems like a recipe for political polarization and continued economic segregation.

What’s behind this shift? A huge amount of it, most likely, is about zoning. As building regulations tightened in the 70s and afterwards, American cities are increasingly divided into two types of development areas: urban cores where very large projects are allowed, and everywhere else, which is generally reserved for single family homes. There may also be a financing component, as getting bank loans for smaller projects may increasingly be a challenge. It’s probably also an indication that the number of sites where multi-family developments are so scarce—and therefore expensive—that it’s simply uneconomical to develop them for anything smaller than a 50 unit building.

But either way, as we wrote back in August, American cities can’t meet their housing challenges, or create liveable, walkable neighborhoods, with just two settings—single family homes and huge apartment buildings. It’s time to find the missing middle.

http://cityobservatory.org/where-did...-buildings-go/

[Austinlee]

Land is now too valuable to have so few units per lot. Economics my dear Watson.

[Crawford]

Originally Posted by Austinlee

Land is now too valuable to have so few units per lot. Economics my dear Watson.

I don't think that's it. It's more a zoning issue.

NYC must be an outlier, because most projects in NYC would be smaller multifamily projects. Not too many SFHs being built and huge towers are only in certain neighborhoods.

[Leo the Dog]

Originally Posted by Crawford

I don't think that's it. It's more a zoning issue.

NYC must be an outlier, because most projects in NYC would be smaller multifamily projects. Not too many SFHs being built and huge towers are only in certain neighborhoods.

Same in SD. In much of Coastal CA strict height limits are in place. Perfect for smaller projects. Can't exceed 30 feet except in certain small areas of San Diego.

[Ant131531]

Atlanta has recently gotten some smaller apartment projects proposed in Midtown where larger apartment projects or highrises dominate. 14 and 10 units respectively.

[ChargerCarl]

Originally Posted by Crawford

I don't think that's it. It's more a zoning issue.

NYC must be an outlier, because most projects in NYC would be smaller multifamily projects. Not too many SFHs being built and huge towers are only in certain neighborhoods.

I don't know much about NYC, but I heard that Bloomberg presided over broad downzonings in many of the outer boroughs that cut off a good chunk of supply of these smaller more affordable projects.

[Reverberation]

1) Land cost
2) Parking requirements (regulatory & market)
3) City ordinances protecting tenants from eviction (in some cases)
4) You don't make much money unless you own several of these, have paid off considerable principal, and can refi. the balance for a long term.
5) Repairs and capital expenditures take a bigger bite of your cash flow.
6) Smaller apartments require higher rent, can't usually justify pools or amenities, and have a tough time competing with bigger projects that benefit from economies of scale.
etc...

But I really like these. I HATE superblock projects and bigger wrap projects. They are harder to police, harder to flip, and don't attract long term tenants.

[mhays]

Funny they mention Seattle. We're getting tons of buildings in the 20-50-unit range. Often these are micros.

The single biggest limitation is often parking. You can't do an efficient multi-level garage on a small site. Doing one level is easy but in some cities/neighborhoods will limit how many housing units you can fit, which can make projects uneconomical. A larger site will make a ramp, stairs, etc., far easier to fit in efficiently. In Seattle's case we simply don't build much parking in the smaller buildings, and often none at all.

That's part of a bunch of parallel reasons related to economy of scale as noted by others. A wider building will be dramatically more efficient with units per elevator, % of space devoted to stairs, structure/enclosure cost per square foot, design cost, and so on. Same thing with the level of effort by the developer. You can do a nice workout room, lobby, etc., and spread the cost among 200 units vs. 20.

As cities densify this all becomes easier. A more urban city can do less or no parking, at least for a percentage of the market that will gravitate toward the small sites. Big cities will be less available and very expensive, so developers will switch to smaller sites.

[Citylover94]

Boston is getting a ton of smaller apartments in Southie and Dorchester with some larger projects mixed in around the squares and main streets.

[memph]

The one advantage smaller buildings do have is that it's easy to acquire a site large enough to build one. Land assembly for the bigger buildings can be a pain, especially if it's infill in an area with small lots, as is the case in much of NYC, which is probably why they have a lot of smaller scale infill. In other cities, the places with small lots are often SFH neighbourhoods that don't allow infill. Or parking requirements make small scale infill impractical.

There is a fair bit of small scale infill near the University of Waterloo campus.
https://www.google.ca/maps/@43.47130...8i6656!6m1!1e1
https://www.google.ca/maps/@43.47405...7i13312!8i6656
https://www.google.ca/maps/@43.47347...7i13312!8i6656
https://www.google.ca/maps/@43.47737...7i13312!8i6656
https://www.google.ca/maps/@43.48019...7i13312!8i6656
https://www.google.ca/maps/@43.48156...7i13312!8i6656
https://www.google.ca/maps/@43.48122...7i13312!8i6656

There are some in Kitchener too, although often with a ton of surface parking...
https://www.google.ca/maps/@43.46326...7i13312!8i6656

What you'll also have in a few areas are multi-plex (duplex, 4-plex, 6-plex) subdivisions as greenfield developments. Are there any like this in the United States? There's a few in Kitchener, but otherwise they're much more common in Quebec than in Ontario.
https://www.google.ca/maps/@43.42370...7i13312!8i6656

[Crawford]

Originally Posted by memph

What you'll also have in a few areas are multi-plex (duplex, 4-plex, 6-plex) subdivisions as greenfield developments. Are there any like this in the United States? There's a few in Kitchener, but otherwise they're much more common in Quebec than in Ontario.
https://www.google.ca/maps/@43.42370...7i13312!8i6656

I think this typology is much more common in Canada.

The only place in the U.S. where it seems to be the norm is in Orthodox Jewish suburbs outside NYC. If you go to places like Kiryas Joel or New Square or Monsey, NY, or Lakewood, NJ, these small greenfield apartment complexes are the norm. Kiryas Joel, in particular, seems to be 100% small greenfield apartment complexes. But these are hardly typical U.S. suburbs.

[llamaorama]

3) City ordinances protecting tenants from eviction (in some cases)

4) You don't make much money unless you own several of these, have paid off considerable principal, and can refi. the balance for a long term.

But wouldn't those things affect single family home rentals too? But those and duplexes are hardly uncommon.

Up the road from you in College Station, we have an abundance of little 4 unit rental buildings. Every single empty lot in the old part of town is turning into what are being branded by the builder as "Ag Shacks". And townhomes get mixed into new single family home neighborhoods here. All to cater to all the students and post grads who rent. But, since there has been a backlash against these things and it is harder to permit them, I've noticed a drop off in their construction...

[scalziand]

In Worcester at least, minimum lot size and frontage requirements make building new triple deckers just about impossible.

[pdxtex]

come to Portland. there are toooooons of small apartments going up everywhere. we have a "missing middle" too, but its not for rentals, its for owner occupied multifamily. you have two choices of home in inner Portland, apartment or 100 year old single family home. no townhomes, patio homes, condos are being constructed. I don't know if this is a national phenomenon or one that just reflects a change in urban demographics. maybe both. more people are moving to urban centers but less and less of them are choosing or implying that they want to be owners. the inner market in Portland is pretty much tapped out and the rush for affordable homes will switch to east pdx.

[strongbad635]

#3 reason: Economics. It's less profitable to build and manage several buildings of 10-20 units spread out geographically. Even offering a manager a free on-site unit, which is common for property management jobs (I currently have this arrangement), you need AT LEAST 40-45 units to pay for the manager's salary. So here in LA, most of these small buildings are run by a manager who has 4-5 buildings in their portfolio, forcing them to have to move around a LOT during the workday and making it more difficult to provide personal and caring service to tenants in these various buildings.

#2 reason: Zoning. Most of our cities have terrible zoning laws that promote buildings that destroy the urban fabric. Here in Los Angeles we have characters like Geoff Palmer, who in addition to fighting affordable housing with every fiber of his being is putting up these monstrosities in hot neighborhoods like downtown or Silver Lake. Massive buildings with big concrete parking structures that relate very poorly to the street and add to valuable retail frontage.

#1 reason: Parking Requirements. We have insane parking laws in the US that mandate far more parking than is needed, especially in areas that wish to become less car-dependent. Smaller buildings face enormous challenges as far as figuring out how to stow one car for each apartment. In Los Angeles, the norm in the smaller mid-century buildings is to have a basement parking structure, or to put the building on stilts with parking on the ground level (these buildings are referred to as dingbats, charming). In some smaller buildings, the space dedicated to car storage almost equals the space dedicated to humans in the apartments. We really need to eliminate mandatory minimums and let the market decide how much parking to provide.

[xzmattzx]

I would guess that the government push for homeownership has contributed to the decline as well. Lowrise apartment buildings have been replaced by townhouses, which similarly occupy relatively small lots, yet offer the chance to be a homeowner, especially for starters or immigrants, and the like.

[ChargerCarl]

I think it's basically just zoning. The natural place for these to be built are in single family neighborhoods where development costs are low.

But as we all know our nations SFR neighborhoods are special little snowflakes that should be preserved at all costs.

[a very long weekend]

in san francisco, loads of small buildings are still being built. reasons: height limits, high cost of property acquisition to assemble a large parcel, ability to build without parking, high rents/sales price so that building underground parking still pencils.

[tayser]

Great topic, the mainstream media in Melbourne seems to think that the city is either only building 'high-rises' in the city centre and sprawl on the fringe with nothing in between.

We made a point of tracking all (or attempting to track all) projects in Melbourne Metro which are 2/3 levels and up.

And it got really silly at one point so I just did two articles which listed them all.

2, 3 and 4 level projects - 208 back when I wrote that (there's more now).
5 and 6 level projects - 214 back then.

~45% of all projects on our DB are either 2, 3, 4, 5 or 6 levels in height!

[memph]

Originally Posted by strongbad635

#3 reason: Economics. It's less profitable to build and manage several buildings of 10-20 units spread out geographically. Even offering a manager a free on-site unit, which is common for property management jobs (I currently have this arrangement), you need AT LEAST 40-45 units to pay for the manager's salary. So here in LA, most of these small buildings are run by a manager who has 4-5 buildings in their portfolio, forcing them to have to move around a LOT during the workday and making it more difficult to provide personal and caring service to tenants in these various buildings.

I think what's common in many cities is that the "building manager" is not a professional, but is the same person as the owner. That's how it often is in Montreal and Toronto for buildings with 2-4 units. The owner might have the ground floor unit, and then 1-2 floors above, or the basement, is rented out. The owner/landlord is often doing it part-time, there's many possible arrangements, it can be retirees that have accumulated a fair bit of wealth to buy a small apartment building but are looking for a source of income now that they're not working, from something that doesn't require full time work and provides for flexible hours, like with my grandparents who own a triplex in Montreal. It can be a couple with a stay-at-home mom taking care of landlord duties. You could have someone with a diverse skill set involved in some combination of building, renovating, upkeep, maintenance and other related duties. Maybe you have your own business as a plumber or electrician which gives you more flexible hours and you can be part-time working on your properties, part-time for others. Owning multiple properties in a single neighbourhood is not that hard, if you're growing your business/wealth gradually. My landlord as a student owned a house and duplex, both rented out to students, within a 5-10min walk of each other. My parents' landlord when I was born owned a triplex and a duplex on the same street.