Economist: Low Rental Vacancy Could Help the Economy

• January 10th 2012

by Shilpi Paul

Last week, UrbanTurf reported on the apartment vacancy rate in the District, which is the third lowest in the country at 3.8 percent. The trend extends to the rest of the country, where the apartment vacancy rate is the lowest since 2001. But the low vacancy might actually be a good thing, according to one economist.

On the blog Modeled Behavior, Karl Smith investigated the cascading effects of low rental vacancies on the housing market, concluding that the vacancies will lead not only to a more urban nation, but also an economic recovery.

A few of his main points:

• Banks will be more likely to support new apartment complexes if they see that vacancies are low, leading to a boom in multifamily development.
• Single-family rentals will become more profitable, and more common.
• Holding a mortgage may be more affordable than renting, and buying will increase, particularly in transitional neighborhoods.

From Smith’s post:

All of those things are positive for recovery. What we really are looking for now though are multifamily starts. Apartment buildings. I am not calling for a million SAAR [Seasonally Adjusted Annual Rate] on multifamily, but I am already saying that this is not crazy. And, it would represent a transformative boom. A boom that will not only pull America out of the slump but change the way our cities look. If our cities will have them.

Here in the DC area, over 23,000 new apartment units are expected to deliver in 2012 and 2013.

This article originally published at https://dc.urbanturf.com/articles/blog/low_rental_vacancies_could_pull_us_out_of_economic_slump_claims_economist/4889.