Writer: Joshua Andino
2 min read September 2021 — There is a housing crisis in the United States. Unlike the 2008 recession, lending standards and the financing of homes are robust. Today, the issue is inventory: America needs more houses.
Changing demographics have seen millennials and Gen Z become an increasingly larger share of the market but many of the single-family homes they’re searching for are already owned and occupied by older generations, particularly baby boomers. While many are looking to downsize, the unintended consequence of one of the strongest sellers’ markets in recent memory is that many are hesitant to sign the sale before having another place to live already prepared, and the prospect of paying record-high prices for less living space is not a prospect that satisfies anyone, regardless of demographic. Between millennials and Baby Boomers, the demand for housing is high. The problem is the lack of supply.
While the answer seems simple — build more housing — the process is difficult as developers are quick to note that zoning regulations, permit boards and approval processes often bog down development and drive up expenses. That is not to say that regulations and committees do not serve an important purpose — a community should have the ability to choose its future. But progress moves at the speed of government and its slow pace in turn leads to rising costs due to material prices and labor fluctuations that have come to dominate the post-pandemic economy. This has led to more developers looking to maximize their buildings and look for underserved markets to make the most of the present demand. While some have doubled-down on luxury developments, others have looked to capitalize on the need for affordable, and in this case essential, housing in rapidly growing markets.
Essential housing is the solution proposed by Charlotte-North Carolina-based developer Grubb Properties. “Building essential housing will provide new housing product for the ‘missing middle’ renters who don’t qualify for subsidized housing but can’t afford the luxury housing that is the majority of new construction. Providing them with quality rental options can help put them on the path to economic stability and mobility,” CEO Clay Grubb told Invest:. Grubb’s Link Apartments are the spearhead of the solution, considering key pillars of price and proximity to transit and job centers in the hopes of addressing the low-inventory issue facing many cities in North Carolina.
“We focus on urban locations in gateway and high-growth markets. From there, we measure locations against five pillars of resilience: climate-related risk, the presence of state or federal government, proximity to universities, proximity to medical centers, and proximity to transit options. That way we are able to find sites that are near community amenities and entertainment, employment, and transit options – all in resilient locations,” Grubb said.
The apartments cannot come soon enough, as many have noted an exodus from well-established and densely populated metropolitan areas toward secondary cities and growing markets that has already spurred a housing boom across the Sun Belt and the fast-growing Carolinas. As young professionals look to purchase or lease their own proper residences, many remain underserved as a result of the focus on either luxury or affordable housing developments, which either price them out in the case of the former, or are reserved for those living at or below the property line in the latter.
“Essential housing is the product for households earning more than 60% of an area’s median income, putting them above the cutoff for a public housing subsidy, but less than 140% of that AMI, putting them below the threshold to afford luxury housing. It offers working professionals a quality housing option affordable to them in urban markets,” explained Grubb Properties’ Chief Investment Officer Todd Williams. Essential housing’s distinguishing characteristics make it more appealing both to investors and many residents alike due to the lack of public subsidies required in other forms of housing.
“It’s different from traditional affordable housing, which uses a public subsidy, and workforce housing, which largely services middle-income families through existing rental products that usually have two to four bedrooms and are typically located in suburban areas close to schools.” Williams said.
Grubb Properties’ Link Apartments are already beginning to dot the state and have remained highly occupied throughout the pandemic, a testament to Grubb’s efforts to keep the projects affordable, with Megan Slocum, the managing director of Link Apartment developments, saying, “We have a disciplined approach to cost management and a rigorous process to help keep construction costs in check. For example, we use Gross Max Price agreements with contractors, which limit the company’s exposure to price fluctuations.”
The project’s popularity speaks for itself, with developments or completed projects in Charlotte, Raleigh, Winston-Salem, and Chapel Hill. “We have several Link Apartments℠ communities coming forth in North Carolina that are in Opportunity Zones, which are traditionally underserved and underdeveloped areas. One is Link Apartments 4th Street in Downtown Winston-Salem. In Charlotte, we are developing Link Apartments℠ NoDa at 36th, which will be right along the light rail line in the amazing NoDa neighborhood, along with a couple other communities in development. And in Chapel Hill, our recently opened Link Apartments℠ Linden at Glen Lennox has been a big success, reaching full occupancy almost five months ahead of schedule,” said Annanias Rose, the company’s vice president of brand strategy and innovation.
Despite the challenges facing the housing market, Grubb has stayed ahead of the curve through more affordable and efficient construction methods that are expanding the available housing stock across North Carolina and paving the way toward future growth. Grubb remains bullish on the future of North Carolina and Charlotte’s growth in particular. “The demand is huge. Charlotte had close to 100 people a day moving here pre-COVID. I think there will be even more in the future,” Grubb said.
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