• Sun. Apr 21st, 2024

Greystar Creates Brand Targeting US Shortage of Workforce Rental Housing

Bynewsmagzines

May 31, 2023
Rendering of Ltd. Med Center, the first apartment project under Greystar's new brand aimed at addressing a shortage of workforce housing. (CoStar)

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One of the largest U.S. apartment owners and managers launched a brand aimed at addressing the nation’s shortage of workforce housing that will include modular construction to keep costs down.

Greystar, based in Charleston, South Carolina, said Ltd. by Greystar will provide newly built housing for workers such as teachers, first responders and nurses who typically can’t afford to rent such apartments. The brand relies heavily on incorporating technology that accelerated during the pandemic to reduce operating costs at properties, allowing for lower rents.

A major piece is setting rents at an attainable level and guaranteeing they rise by no more than the consumer price index, or 3%, whichever is higher. The CPI was 4.9% in April. Greystar’s first development under the brand is Ltd. Med Center, which is leasing up now in Houston near the Texas Medical Center, the world’s largest medical center district.

Greystar, ranked No. 2 on the National Multifamily Housing Council’s 2023 list of the largest apartment owners, joins other developers in trying to address a workforce housing shortage that ballooned in the pandemic as rent growth soared around the country above rates of inflation.

While rent growth has slowed considerably, largely because of record levels of construction, new building is mostly targeting the higher end of market rents.

Fannie Mae estimated the housing shortage at 4.4 million units across 75 U.S. metropolitan areas in an October report that included ownership as well as rental units. Fannie Mae’s estimated shortage is spread across the spectrum of workers earning 60% or less of an area’s median income and those earning 80% to 120% of median income. Workforce housing is defined as those earning 80% to 120%, Fannie Mae said.

The demographics of metropolitan areas and their housing stock can vary significantly, so some “areas have a pronounced need for more affordable low-income housing, while others need more workforce housing,” Fannie Mae said in the report.

States, cities and school districts around the country had been trying to solve the workforce housing shortage. Chino Valley Unified School District about 100 miles north of Phoenix recently made headlines when it announced that it was building 10 studio units renting for $550 per month to attract teachers.

Average asking rents on Greystar’s new Houston property under the Ltd. brand are $1,043 per month, about $800 a month below the average for new apartments, according to CoStar data.

Leasing has been strong, according to Brandon Chinn, senior director of innovation at Greystar. The company’s marketing plan went beyond the digital campaigns that are common for most new apartments now leasing up.

“We went and dropped off cookies and gift baskets at schools and the medical center to get the word out,” Chinn told CoStar News.

One of the ways it is bringing operating costs down is reducing the number of staff needed at the property. Potential renters take self-guided tours without a leasing agent tagging along. Or they do virtual tours.

Apartment owners turned to those technologies during the pandemic shutdowns. Potential renters took to the new procedures and now often prefer them.

Chinn said the apartments will have plenty of self-serve elements, working through mobile apps to make requests. And so far, the company is seeing an increase in net operating income, he said.

Greystar has four other developments under the Ltd. brand planned over the next 18 months. One of those will be built solely of modular components from a plant Greystar opened in April in Knox, Pennsylvania.

“We are harnessing the innovative power of the private sector to deliver a rental product that is less expensive, more attainable, and sustainably produced to meet a need we are seeing in the market,” Bob Faith, Greystar’s founder, chairman and CEO, said in a statement last month.

According to the industry, most of the cost savings are in the speed at which the modules can be built, delivered and installed. Modular apartment construction has picked up over the past several years as a method to deliver new units more quickly.

Multifamily construction has been the largest segment of the modular construction industry for the past three years, according to the Modular Building Institute’s 2023 annual report. Multifamily accounts for about one-third of all output.

The report said the overall industry hit $12 billion last year, equating to 6% of overall construction starts. That is triple where the industry was in 2015.

Modular construction has been used on new apartments in places such as St. Paul, Minnesota, as well as Florida, New Hampshire, Massachusetts and Pennsylvania.

Miami-based apartment developer Resia, which is owned by Brazilian homebuilder MRV, is one of the major players. It has been using modular construction methods to build apartments in Texas, Atlanta and South Florida. Resia Ten Oaks in West Houston has modular construction elements and the Genlser-designed 537-unit property is set to open late next year.

The company announced last year that it was building a factory in Bay City, Florida, in the state’s panhandle.

“Our construction method allows us to build quickly and achieve cost-savings that are passed on to our residents,” Ernesto Lopes, Resia’s CEO, said in a statement when the plant was announced a year ago.

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