Despite Affordability, Supply of Small and Medium Multifamily Housing Declines

Small and medium multifamily properties (SMMF), or buildings with 2 to 49 units, are a critical source of naturally occurring affordable housing, and policies are needed to address the production and preservation of SMMF housing units, according to Andrew Jakabovics and his colleagues. Using public and proprietary datasets, the authors analyze the SMMF housing stock in relation to single-unit buildings and buildings with over 50 units, focusing on four characteristics: SMMF’s share of the overall housing stock, its affordability, its age, and its proportion of rental and owner-occupied housing. Finding that SMMF housing matters to both renters and homeowners, the authors conclude that policymakers should support development of financial tools to preserve SMMF housing and reduce barriers to producing new SMMF housing to ease growing housing affordability challenges.

Key findings

• SMMF housing makes up 21 percent of the national housing stock and 54 percent of the overall rental stock. These properties are not limited to urban areas; 22 percent of all homes in the suburbs are in SMMF buildings.
• SMMF units are, on average, more affordable than single-family homes or large apartment buildings, with the lowest rents found in small SMMF buildings.
• SMMF housing includes 55 percent of all subsidized housing units. Of all SMMF housing, buildings with fewer than 10 rental units house the lowest-income residents.
• Over 25 percent of all units built in the 1970s and 1980s were SMMF housing, but since 1990, SMMF only constitute 15 percent of new construction.
• Although only 4 percent of homeowners live in SMMF housing, there are relatively high concentrations of owner-occupied SMMF housing in New England, Chicago, and several South Florida metro areas.
• Policymakers must simplify and expand the production of SMMF housing and create new tools to provide incentives for preserving and funding SMMF housing.