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The low-cost stock (renting for under $650 per month, or roughly the
<br />bottom quintile for rents) consists of units in a broad mix of struc-
<br />ture types ]Figure 17). In 2016, the number of occupied low-cost rentals
<br />was distributed fairly evenly across structure types, with 1.8 million
<br />each in single family homes and buildings with 2-4 units, 1.9 mil-
<br />lion in buildings with 5-19 units, and 2.1 million in buildings with 20
<br />or more units. Mobile homes account for another 724,000 low-cost
<br />units. In contrast, some 71 percent of higher -cost units (renting for at
<br />least $1,500 per month, or roughly the top quintile) are attached or
<br />detached single-family homes or in buildings with 20 or more units.
<br />Rental apartments in buildings with 2-4 units are the most likely to
<br />be affordable, accounting for 22 percent of the lowest -cost stock but
<br />just 13 percentof the highest -cost supply. Multifamily buildings with
<br />5-19 apartments are also more likely to have moderate rents, provid-
<br />ing 27 percent of units renting for $850-1,099 and only 16 percent of
<br />highest -cost rentals.
<br />ADDITIONS TO THE RENTAL STOCK
<br />The number of single-family rentals shot up from 14.2 million units
<br />in 2001 to 18.2 million units in 2016—a 29 percent increase that far
<br />outpaced the 18 percent growth in the overall rental stock. Own -
<br />to -rent conversions drove almost all of this gain, with only 575,000
<br />single-family homes built expressly for the rental market over this
<br />period. Indeed, in 2011-2013 alone (the last year for which a constant
<br />sample is available), tenure conversions of occupied housing units
<br />resulted in a net gain of more than 420,000 single-family rentals.
<br />However, this trend may be moderating. According to the American
<br />Community Survey, 2015 was the first year since 2006 when the
<br />number of single-family rentals declined, suggesting that there were
<br />at least some conversions back to owner occupancy. While turning up
<br />again in 2016, growth in the number of single-family rentals none-
<br />theless remained well below average annual levels in the previous
<br />decade.
<br />Additions to the Rental Stock Are
<br />Increasingly at the Higher End
<br />Share et Recently guilt Units Percanq
<br />45.........._.._.............................................................................._...........
<br />40
<br />35
<br />30
<br />UntlorS650 $950-849 $950-1.099 $1,100-L499 $1,590 and Nor
<br />Monthly housing Cost
<br />'?:i 2001 02016
<br />Notes: Recently bulltunits in 21101120161 warn bulli 18 6420012016) Monthly housing costa Include rent antl
<br />utilities card have bean adjusted to 2015 dollars using the CPI-0AII Items Less Solos, 0emal units exclude vacant
<br />units and units where no cash rent ie paid.
<br />Source : JCHS tabulations of US Census 6amau. 2001 and ell 6 American Community Santry 1 Yon Estimates.
<br />newly built units renting for less than $850 per month fell from 42
<br />percent of the rental stock to 18 percent.
<br />RISING CONSTRUCTION COSTS
<br />At least part of the reason for the surge in high-end construction
<br />is that developing multifamily housing is increasingly expensive.
<br />Between 2012 and 2017, the price of vacant commercial land—a
<br />proxy for developable multifamily sites was up 62 percent. Over
<br />this same period, the combined costs of construction labor, materi-
<br />als, and contractor fees rose 25 percent, far faster than the general
<br />inflation rate of just 7 percent (Figure 19). Cost increases for key build-
<br />ing materials, such as gypsum, concrete, and lumber, have also out-
<br />paced inflation in recent years.
<br />Data obtained from RS Means indicate that construction of a three -
<br />Meanwhile, most new rental construction consists of larger proper- story, 22,500 square -foot apartment structure with a reinforced
<br />ties. Census construction data show that the share of completed
<br />rentals in buildings with 20 or more units grew from 54 percent in
<br />2001 to 83 percent in 2016. As a result, apartments in these larger
<br />properties accounted for just over one-fifth of the rental stock (9.9
<br />million units) in 2016, an increase of 37 percent—or more than 2.6
<br />million units—since 2001.
<br />In addition to their concentration in large structures, many recent
<br />additions to the rental stock have high rents (Figure 18). The share of
<br />newly built units renting for $1,500 or more soared from 15 percent
<br />in 2001 to 40 percent in 2016. Over this same period, the share of
<br />concrete frame—including the cost of materials, labor at union
<br />wages, and fixed contractor and architectural fees, but excluding
<br />land costs would average $192 per square foot in 2017. The cost of
<br />building that same structure in 2016, however, would have been 8
<br />percent lower. Of course, costs vary widely by location. For example,
<br />construction costs for this sample building would be 43 percent
<br />above the national average in New York City and 17 percent below
<br />the national average in Dallas.
<br />Adding to development costs, recent construction of rental hous-
<br />ing is largely concentrated in central cities. Between 2013 and 2016,
<br />17
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