Austin Business Journal reports, "Austin is expected to deliver more affordable multifamily housing units than anywhere else in the country in 2025, and it still may not be enough.
With housing affordability a major issue both in Austin and across the country, 2025 is expected to see 78,377 affordable multifamily housing units delivered nationally, with 3,452 units in Austin alone, according to a new report from Yardi Matrix. Los Angeles is expected to deliver the second-most affordable units this year, at 2,752.
Even with nation-leading construction, however, worries persist that Austin still won't have enough. In addition, rising development costs and other issues could reduce the number of new units in coming years.
Affordable multifamily housing units are units with below-market rental rates deemed affordable for households earning up to certain percentages of a region's median income. There often are tiers of affordable rates at any given property. For instance, a development might have 20 units for households earning 30% MFI, 20 more for households earning 50%, and so on.
But the concerns don't just pertain to multifamily units — there's a shortage of affordable single-family homes too.
“We still very much need a higher concentration of lower priced homes,” said Clare Knapp, housing economist for Austin Board of Realtors and Unlock MLS.
Of 29,763 homes sold in the metro in 2024, just 3,117 went for between $200,000 and $299,999, according to Unlock MLS data — and only 322 were sold at prices below that range.
“That’s not because folks don’t want to buy homes in that price cohort," Knapp said. "It's just that we don’t have enough supply available."
According to the Yardi Matrix report, Austin — which now has more renters than homeowners — is expected to see 9,528 affordable multifamily units delivered from 2025 to 2027. The figure might be higher were it not for issues such as rising construction costs — a byproduct of inflation and, potentially, tariffs on building materials from Canada and Mexico — and elevated interest rates, experts say.
In addition, “you’re seeing the construction starts begin to come down as people have noticed the supply catching up to the need in Austin,” said Jason Arechiga, senior vice president of development at The NRP Group, a for-profit developer of multifamily and affordable housing projects.
Rising costs of labor are also impacting construction of new affordable projects, according to the Yardi Matrix report. Affordable housing projects that receive federal aid are subject to the Davis Bacon Act, which mandates that contractors pay a local prevailing wage determined by the U.S. Department of Labor, resulting in a relatively high pay standard, the report said.
Meanwhile, labor shortages in the construction industry have lengthened construction times. From 2020 to 2024, the median construction duration for a project was 19.2 months, compared to 16.1 months from 2015 to 2019, according to Yardi Matrix.
Arechiga said another issue plaguing the Austin metro in particular is elevated land prices.
“You still see land pricing real high,” he said. “It hasn’t come down yet … People look at what their neighbors sold last year and say, ‘Well, they got $10 million for that piece of land,’ and the market isn’t there.”
Austin's environmentally friendly policies also are a factor, Arechiga said. While stressing that the goal of protecting the environment is a good one, he said it also can make it harder and more expensive to build affordable housing. In some cases, for instance, a developer that owns 10 acres can only use three of them, he said, which impacts costs as they try to build taller and denser on smaller tracts.
Still, "these barriers are surmountable, not insurmountable,” Arechiga said. “When you still have people wanting to move to Texas and to your city, that’s a good thing. The day you start losing that, the day that stops happening, is the day you’re really in trouble.”"
Source: Austin Business Journal
Written by: Cody Baird
Published: February 10, 2025
Posted by Grossman & Jones Group on
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