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Can enough apartments be constructed to solve Las Vegas’ housing woes?

Updated August 5, 2023 - 9:10 am

Mike Moriarty’s new job may serve as an interesting bellwether for Las Vegas real estate.

Moriarty has been named the new vice president of development in Las Vegas for The NRP Group, one of the country’s largest apartment developers, which recently pinpointed Las Vegas and Phoenix as key areas of growth for the Cleveland-based company.

The developer pointed to a recent report from Redfin, an online real estate brokerage, that found Las Vegas topped the country as the most popular destination for relocating homebuyers, as another bellwether for the city.

“We’re talking about tens of thousands of residents moving here each year,” Moriarty said. “So supply and demand are really interesting right now, and in terms of multifamily, the supply that is going to come online, in terms of units built and ones coming up for lease in the next 12 months, there’s north of 9,000 units planned alone, which is the most there has ever been.”

Avison Young estimates the Las Vegas metro currently has a supply of well over 203,000 apartments units, and commercial real estate developer Colliers tabulates local multifamily developers have approximately 12,492 units under construction and an additional 9,795 planned, according to its second-quarter report.

Moriarty said NRP’s plans in Las Vegas are long term, and although they are starting with class A projects (high-end rentals) for their first two developments — which are in the works in the southwest portion of the city — the larger goal is to develop all types.

“No. 1, we want to be in this market long term,” he said. “So we’re already researching how to break into developing affordable and workforce housing.”

Workforce housing is generally described as targeting middle-income earners and affordable housing is for those making at or below the median income, which sits at $33,363 in Las Vegas according to U.S. Census data.

Shortage of low-income rentals

Las Vegas finds itself at an interesting point in terms of demographics and real estate. UNLV’s Center for Business and Economic Research projects the valley will continue to grow year over year for the foreseeable future, adding 42,066 residents in 2023 alone. And National Low Income Housing Coalition estimates the valley is already short close to 84,000 low-income rental units, a number that has been steadily rising the past few years.

Colliers multifamily statistics aren’t broken down into classes, however, and according to the Nevada State Apartment Association, multifamily supply isn’t the issue, it’s the right type of multifamily supply that needs to be built.

“Projects are largely under construction in the Henderson, Enterprise and Summerlin areas due to strong demand, higher rents and availability of land. Many of these projects are in the higher-end tier,” stated a report from NSAA. “This surge in construction is likely due to the economic rebound in the area and significant migration from the Southern California metros. In most cases, the median home price makes the monthly mortgage payment more costly than the average asking rent for higher-end apartments.”

Robin Lee, the executive director of NSAA, said the goal is to make sure developers aren’t simply keying on one demographic because of bottom lines.

“We’re seeing a lot of development right now,” she said. “There’s a lot of units that are going to be coming on the market this year and early next year, but what’s difficult is bringing more affordable units on the market because of construction costs and policy barriers.”

Moriarty agreed with this statement, adding developers need to be incentivized to build all types of residential.

“The government needs to find a way to get more funding, and I’m not saying Clark County hasn’t done that, however I would hope the government, both locally and federally, would keep pushing for that, and it will all help. And I will tell you honestly there is not a need for one over the other, there is a demand for class A, there is a demand for workforce and affordable and we really do plan to break into all three of those assets.”

In 2022, Clark County introduced the Welcome Home Program and Clark County’s Community Housing Fund “to address the urgent need for housing for low-income residents in Southern Nevada” and so far multiple rounds of funding have been announced or allocated, totaling more than $200 million.

Nicholas Irwin, an assistant professor of economics and real estate and an affiliated faculty member with the Lied Center for Real Estate, said there are two ways to go about making sure a city has and is getting a healthy supply of affordable units. The first is to legislate, making certain areas zoned specifically for affordable housing. The second is to incentivize developers through such things as tax abatements to make them want to build affordable housing along with other types. He said in his opinion, the latter is much easier.

“You can do it either with the carrot or the stick approach,” he said. “The best way to do it is the incentive approach, because we run into issues here in Clark County where say Las Vegas puts in inclusionary zoning, well what is stopping a developer from just going over to unincorporated Clark County where they don’t have to abide by it, and so you get unintentional spillovers.”

One thing Lee said is not the answer when it comes to getting Las Vegas more affordable housing is the government getting directly involved with the market. Gov. Joe Lombardo recently vetoed a number of rent-related bills concerning tenants rights and eviction reform, drawing ire from a number of community groups.

“Rent control is a known failed policy, it’s proven,” Lee said. “Any economist you talk to no matter what side of the aisle they are on, or as far away from the aisle they are, rent control is a failed policy and it disincentivizes people from providing quality housing. It makes people back out of the market and it causes tremendous economic consequences.”

Contact Patrick Blennerhassett at pblennerhassett@reviewjournal.com.

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