walkitout (walkitout) wrote,


Throughout the 2000s, we had a massive single-family housing b*. Call it a boom, call it a bust, call it a bubble, call it a boondoggle. I don't care. It was something that involved a word starting with the letter b, and involving _single family_ housing.

I thought this was wrong, in part because I really believed we had a secular trend starting in the 1990s of densification (moving nearer to the central core of jobs/shopping/culture, rather than away). However, people do what people do, not what I think they should do.

Once the bubble burst in the bust (sorry about that), it was inevitable that a period of don't-build-a-damn-thing would occur (complicated by things like heavily zoned areas that never overbuilt to a great degree and bankrupt nearly finished developments being completed by a bank and then sold for less than resales in certain areas). Because oil prices, while fluctuating, have been persistently high, I figured "this time for sure, Rocky", we'll actually see movement towards the center and/or multi-family development. R. and I had a little conversation about what the ramifications of that might be.

(1) Are there college degrees in property management? Because I'm pretty sure that's an enormously complicated activity and would reward doing it right. YES! There are certificate programs, undergraduate, graduate degrees, etc.

(2) Who is going to build multi-family? Toll Brothers may be doing a tiny amount of multi-family (ooh, look, we're doing a Manhattan mid-rise!), but it's all for-sale stuff. (OK, that's not true. They were looking to hire someone to start their multi-family for-lease team last June: http://www.selectleaders.com/candidate/viewjobdetails.do?jid=21626) _Someone_ was popping up downtown midrises through the 1990s and even the 2000s, and it wasn't all condos. Who were they?

Equity Residential (EQR): I pointed to one of their web pages when I was wondering if apartments offered EV charging stations as an amenity. EQR has 428 properties, 123,664 units and over 4000 employees. (A Sam Zell operation. Yikes.)

Avalon Bay (AVB): 195 properties, 56516 units, 13 under construction, 8 under reconstruction, development rights in 32. They specialized in high-quality, high barrier to entry markets (they mean, zoned and the zoning process is contentious).

Aimco (AIV): 607 properties, over 500,000 residents (I'm assuming they average more than one resident per unit, given their tiers are "conventional" and "affordable"; I figure on the order of 150K). AIV's market strategy is "20 largest" and liquid. I think that means their management strategy involves running things into the ground and then offloading them onto an unsuspecting "investor", but that could just be me being really cynical.

Essex Property Trust (ESS): west coast specialist (Bay Area and north, as near as I can tell). 150 properties, 30,995 units. Their strategy is "highly desirable, supply constrained".

There are more (believe me, there are more). These are just 4 of the big apartment REITs, which (re)develop, own, manage apartment complexes. Employment for one of these companies (outside the home office) includes property managers in multiple tiers, maintenance techs in multiple tiers, etc.

I want to know how many jobs might be created as an effect of people living in apartments instead of living in single family houses. REITs have permanent employees: managers, techs, etc. arrange to have the roof and leaky faucet fixed, rather than the homeowners (the homeowners, in this case, are the people who hold stock in EQR, AVB, ESS, AIV, etc.). We've been below trend on building single-family housing; what if we are actually looking at the "new" trend, and it will be matched by a future trend involving a lot of multi-family housing permitting and construction?

Now I'm going to make up some numbers. Feel free to chime in with better numbers:

New single-family housing trend: 600,000 units per year.
New multi-family housing unit trend: 500,000 units per year.

Think those are low? Yes! Why. Well, I think a lot of people would like to not live with their parents, but we aren't building multi-family fast enough therefore a lot of people are going to be chasing rents for a while until the multi-fam developers start catching up (when will that be? Never, if history is a gauge. When residences are run like businesses, they tend to be small and expensive).

500,000 is a lot for multi-family; we're not there yet. But I'm projecting a hypothetical trend; bear with me. [The alert reader will notice that I'm assuming all of that multi-family is for-lease when I start doing the jobs-per-unit calculation. This is a completely bullshit assumption; the actual fraction that will be for-lease will likely be well-under half of whatever multi-family is built.]

How many units of multi-family does it take to create a job? R. and I had one approach to figuring this out. A small (about 10) unit apartment building can drive you nuts trying to manage it on top of a "real" job or jobs if you own it as a couple. A real go-getter can run 3 or 4 of these rented to students in Illinois a couple decades ago and turn that into a full time gig (hiring out a bunch of work as well). That implies something like a 30-40 units = 1 job.

I dug around to come up with number of employees at EQR, AVB, AIV and ESS, as well as number of units. For EQR, AVB and ESS, the ratio is within the 30-40 units = 1 job range. AIV comes in above 40, which is unsurprising (its tiers are "conventional" and "affordable" and nowhere are words like "luxury", "high-quality", "high barrier-to-entry", or "supply-constrained market" used in describing their business).

We _were_ building a couple hundred thousand multi-family a year, so if we add another 300K multi family units a year, I think we could expect that to add 9-10,000 direct jobs along with those units. Every single year, and previous years employment is conserved (until the units are destroyed).

It's not at all obvious to me how to calculate whether these are net new jobs (that is, would single-family units of recent vintage somehow generate even more paid employment compared to multi-familiy units). Some aspects of maintenance are not "jobs" when done by the homeowner, however, if multi-family units create fewer lawn maintenance, house cleaning, (even dog walking) jobs than single-family, the 9-10K direct jobs associated with a change in mix towards multi-family would net out less (or even, possibly, negative). You'd probably need a lot more data and a software package to figure that out and I don't really care that much.

There are some downsides. People who have these jobs have some very negative things to say about a lot of the big employers. OTOH, there are _always_ jobs available. It's probably better than flipping burgers or bodies, right?

As a side note, Trammell Crow spun off its _management_ business, which makes it really different from all of the above (which own and manage, mostly what they own). Riverstone Residential is _huge_: supposedly 200K units with 1025 employees -- you'll notice how different that ratio is from the REITs altho to be fair I got the information from a very different site. I think that reflects this: "Services include leasing and marketing, due diligence, resident screening, and debt collection.". Which gives you an idea of the division of labor (all the missing workers are presumably in maintenance).

R. and I hypothesized that a really competent property manager might want to unload the properties and lease their services to the property owners (thus separating the business from the property appreciation/depreciation) (incompetent managers might want to do that, too, but presumably they'd be less successful at finding customers). However, we did not imagine a scenario in which the property management included no maintenance at all. I'll have to think about that for a while. Riverstone is a private equity operation so it's trickier to get insight into what they are doing and how well it is working.

ETA: Above, I mocked Toll Brothers for just _now_ starting a multi-family for-lease development business. That was unfair of me. KB Home _sold_ theirs (an affordable apartment housing business) in 2000.


There's no indication that they've turned around and tried to create a multi-family for-lease business on the high end, either; they're still in the build-expensive-condos-somewhat-convenient-to-transport phase, along with D R Horton, Lennar and Pulte (and some fraction of those are 55+ communities). Some of these are properly in urban cores (Lennar's Blu in SF, for example).
Tags: our future economy today, real estate
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