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March 31, 2014
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Published quarterly, Research Notes offers exclusive, in-depth analysis from NMHC's research team on topics of special interest to apartment industry professionals, from the demographics behind apartment demand to effect of changing economic conditions on the multifamily industry.
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Questions or comments on Research Notes should be directed to Mark Obrinsky, NMHC's Senior Vice President of Research and Chief Economist, at mobrinsky@nmhc.org or 202/974-2329.

Apartments Versus Schools Redux

In this era of tight budgets, local governments have to be mindful of potential additional costs to public services. Many local governments’ finances suffered significant deterioration as a result of the recent economic downturn. Income and sales tax revenue fell as jobs and spending declined, while the bursting of the house price bubble took a toll on property tax collections.

However, often these budgetary concerns are unjustly leveraged to slow new development, including apartments. One of the enduring obstacles thrown at apartment developers in many local jurisdictions is this assumption: A new apartment property will bring in too many children and overburden the local school district. But the facts are otherwise.

An earlier Research Notes (July 2002) illustrated this, but more recent and more detailed data allow us to update this earlier analysis. The overall conclusion is the same: The average number of children in apartments is less than the average for single-family dwellings (both owned and rented). The difference is even greater for recently built homes.

What’s more, apartments are taxed at a higher rate than single-family homes, thereby contributing more to local government coffers. Given this information, this overburdening argument appears to have much more to do with biases against both renting versus owning and compact development, community misperception about the economic and social value of apartments, density fears and not-in-my-back-yard (NIMBY) movements than with effective local fiscal planning.

Background

Apartment developers often face obstacles beyond just development and construction costs or financing. In many parts of the country, there are both formal and, more commonly, informal barriers to the construction of new multifamily residences. (Multifamily for-sale developers often face similar barriers as well, though typically to a lesser extent.) These barriers take many forms, including municipal bans on new multifamily development, lack of permit approval without explanation, height restrictions that make multifamily projects unfeasible and vocal neighborhood opposition.

Often this opposition is based on claims that apartments will bring in many schoolchildren and that the local government cannot afford to educate these incoming children. Demographic trends, however, suggest something quite different.

Declining birth rates and increased longevity have reduced the share of children (defined here as those under 18 years of age) in the population; from a high of more than 40 percent in 1900, the percentage of children in the population has slipped to a low of 23 percent. Similarly, the number of households with children has also undergone a long-running decline from a baby boom-driven postwar high of 49 percent in 1957 to under 29 percent today.

Together, these facts show that there are more people than ever to share the costs of primary and secondary education for the nation’s children who, at the same time, have a shrinking share in the nation’s demographic makeup. 

Households with Children

The number of children under 18 years of age is almost 74 million, higher than at any time before 2006 (and only marginally lower than the 2009 high). They are not spread proportionately among different kinds of housing units, however. For example, single-family rentals house the households with the most children while condo owners are the least likely to have children.

 

Of the 116.0 million households in the U.S., 37.5 million (32 percent) have at least one child under 18. Among single-family owner households, the share is the same. Almost half (48 percent) of single-family renter households have children. At the other end of the spectrum, only 12 percent of multifamily owners (in buildings with at least five units) have children. For apartments, the corresponding figure is 24 percent—well below the overall average and that of single-family owners and single-family renters.

On average, there are 60 children for every 100 households in the nation. The figure is about the same for single-family owner households (59), but much higher for single-family renters (96). In contrast, for every 100 apartment households, there are 41 children; for condos the figure is 17.

These data show that, on average, there are significantly fewer children in apartments than in single-family homes, whether renter- or owner-occupied. The difference is even greater among recently built homes.

 

For every 100 households living in all homes built since 2005, there are 80 children. Among single-family renters in newly built houses, the figure is 120, while among single-family owners it is 91. By contrast, there are only 38 children per 100 apartment households living in newly built properties.

School-age Children

If we narrow the focus to just school-age children—traditionally defined as those between 6 and 17 years of age—apartments contribute even less to demand for schooling than the analysis above might suggest. Overall, 25 percent of all households have at least one school-age child. The figure is about the same for single-family owners (26 percent). Among single-family renters, 37 percent of households have school-age children. But only 16 percent of apartment households (and 7 percent of condo households) have school-age children.

The difference is greater still in newly constructed homes (completed since 2004): Fully 35 percent of single-family owners (and 42 percent of single-family renters) have school-age children. The corresponding figure for apartments is only 13 percent, meaning that 87 percent of newly constructed apartment homes have no school-age children. Moreover, there are far fewer school-age children in new apartments overall—only 22 per 100 households, compared with 58 for single-family owners and 77 for single-family renters.

To put this differently, 100 new apartment homes will have the same number of schoolchildren on average as just 35 new single-family owner-occupied houses.

 

Fiscal Burden

All these data make clear that apartments put much less of a burden on local school systems than single-family homes. In addition, apartments are taxed at higher rates than single-family houses. The average property tax rate for the median-value house in urban areas across the country is 1.41 percent; for apartments, the rate is 1.83 percent. As such, apartments contribute more to the local government revenue base than single-family houses.

There is a broader point to be made as well. The number of children (and school-age children) in the nation isn’t determined by the number or type of housing units available. Given the choice families make about whether to have children (and, if so, how many and when), the real question is where, and how, these children are to be housed and educated. While one local jurisdiction can try to push this misconstrued burden onto another through regulation and political pressure, these types of activities don’t help solve the problem. What’s more, any apparent benefit may be short-lived; communities with a variety of different types of housing and real estate—mixed-use, mixed-income, single-family and multifamily—appear to be in greater demand than ever before.

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