Louisville sees spike in companies wanting to build multifamily housing

Apartments in Louisville’s urban core — like the ones proposed along South Fourth Street — are in high demand. | Rendering by GBBN Architects

Interest in the Louisville market from apartment and other multifamily developers has jumped in the past three years, according to data kept by Louisville-Jefferson County Metro Government.

“There has been a very marked increase in the number of applications that we have received,” said Deborah Bilitski, director of Develop Louisville, a department that oversees land use, planning and zoning, and housing development, among other areas.

Charts provided by Develop Louisville show applications for multifamily, senior living, assisted living and University of Louisville student housing. The information shows how many units and where developers want to build, but it does not note whether the development applications were approved or if they ever were built.

The charts show all the applications filed from 2010 to 2016 with the applications filed in a specific year highlighted. The majority of the applications are for multifamily housing, which includes apartments and condominiums.

The number of proposed multifamily housing units jumped to 2,157 in 2011 from 378 units in 2010. From there, the number of units fluctuated over the next three years but never went higher than 2,750.

From 2014 to 2015, the number of proposed units more than doubled with the submitted multifamily housing applications totaling 4,555 units in 2015. Last year, developers proposed building multifamily projects with 4,170 total units.

“The market obviously fluctuates, and right now, we are seeing a very high demand,” Bilitski said.

The National Multifamily Housing Council and the National Apartment Association commissioned a study recently that supports information provided by the city. The study looked at demand for apartment housing and the ease of developing in 50 cities in the United States.

“The Louisville metro area will need all types of apartments and at all price points,” JD Carey, executive director of the Louisville Apartment Association, said in a news release about the study. “Louisville apartment developers, owners and managers and their residents contribute $2.2 billion to the local economy annually, and that number is expected to rise with increased demand.”

The study states that Louisville’s population will increase 7.6 percent from 2016 to 2030 and that the number of renters in the city will go up 10.7 percent during the same period as people migrate to Louisville, older populations downsize and fewer homes sell.

Louisville-Jefferson County Metro Government doesn’t have exactly comparable numbers, but a December 2015 study projected that the city’s population will grow 13.1 percent to 838,053 people from 2010 to 2030. The study didn’t delve into multifamily living but did note that 37 percent of the city’s 309,175 occupied housing units, including multifamily and single-family, were rentals.

The National Multifamily Housing Council/National Apartment Association study purports that developers are expected to build just under 6,000 apartment units a year in Louisville, but even at that rate, rental housing development will still be 9,295 units short of anticipated demand.

Former first lady of Louisville Madeline Abramson and Nikki Jackson, regional executive of the Louisville Branch of the Federal Reserve Bank of St. Louis | Photo by Caitlin Bowling

Nikki Jackson, senior vice president and regional executive of the Louisville Branch of the Federal Reserve Bank of St. Louis, attributed the increased demand to new people moving to Louisville and people moving from the suburbs to the urban core. Jackson noted that one of her friends recently moved into a downtown apartment with her children because it’s a convenient commute to her work and their school.

“It does seem like our inventory is growing and might outpace some of the need, but I am telling you what, those folks, those property developers, they do their homework,” she said.

Jackson added that Louisville’s talent retention has improved, which will help drive the rental market.

“We are retaining more talent that is coming out of schools here, so I think we’ve got some momentum there,” she said.

It is not simply market-rate apartments that are needed, however.

“For many families, locally and nationally, the shortage of affordable rental housing creates significant hurdles that can hamper their future financial success,” Carey said in the release. “This is not just a problem for today. By 2030, the affordable housing crisis will become even more severe unless public and private sector leaders take bold, innovative action.”

In a phone interview, Bilitski made a similar comment to Carey, stating that the city needs multiple kinds of housing that are affordable for all income levels. Through Louisville CARES and funding for nonprofit Louisville Affordable Housing Trust Fund, the city incentivizes developers of affordable-housing projects.

“Priority is given to areas where there isn’t already affordable housing,” she said. “That is an example of where we are trying to help the market.”

Bilitski added that the city provides incentives to developers to build market-rate housing in areas where there are few or no such developments.

According to the study, Louisville also ranked 11th in terms of how easy it is to develop apartments in the city. It ranked behind nearby cities including Cincinnati, St. Louis and Indianapolis.

“I think we are regularly focused on making our development review process as efficient as possible while making sure we are following the law and due process. We are very focused on that, and I think we have made some significant strides over the last few years under Mayor Fischer,” Bilitski said. “We are all about promoting appropriate development, sustainable development that can be accommodated with the necessary infrastructure.”