US Housing Deficit Could Grow Due to Coronavirus

Article originally posted on Globe St. on April 3, 2020

Prior to the coronavirus pandemic, the US had a severe housing deficit. In fact, at that time, the word crisis was largely used to describe the shortage of affordable and attainable housing. While the pandemic has certainly stolen the headlines, there could continue to be a housing shortage, and the coronavirus outbreak could worsen the problem.

“Many expect the U.S. housing deficit to worsen,” BJ Turner, founder of Dunleer, tells GlobeSt.com. “For millennials who already had anxiety about buying a primary residence as a result of the Great Recession, the COVID crisis only amplifies the anxiety as their fears are reinforced about how fleeting employment can be in a crisis. Furthermore, new construction projects that are not yet out of the ground are either completely halted or will be shelved for months to come. Ultimately this leads to more renter demand and less apartment supply.”

While the current economic disruption will certainly create obstacles for apartment investors in the short-term, apartments are well positioned to perform in a recession. “The good news—if there is such as thing—from COVID-19, is that apartments appear to be asset class “winners” in the crisis,” says Turner. “While there will no doubt be some near-term bumps related to the novel coronavirus challenges, they are likely to continue to show resiliency and growth going forward.”

However, investors may face significant cultural shifts that could impact the way the people use not only apartments, but all asset classes. “Coming out of the COVID-19 crisis, there will be certain behavioral modifications—working remotely and working from home will have a higher rate of adoption and acceptance,” says Turner.

While this trend may ultimately benefit apartment owners, it could significantly impact office assets. “The COVID-19 crisis has forced companies to learn how to remotely manage and collaborate with their teams using a widening spectrum of technological tools available, allowing them to save on future lease payments, saving their employees significant commute times, and potentially increasing employee satisfaction,” says Turner.

Co-working specifically is at a high risk for disruption as a result of this pandemic. Turner explains, “Co-working space will likely see a decline, which could prove to be a gain for a multifamily landlord who has slightly bigger floor plans, particularly those that include dens or offices.”

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