City sounds alarm on apartment boom

The numbers don’t lie: Of the more than 75,000 dwelling units in Springfield at the end of 2006, more than a quarter were multifamily units – defined as buildings comprising three or more units.

The number of multifamily unit permits has increased every year since 2003 – from 375 then to nearly 1,000 in 2006.

That rapid increase in apartments worried council members about whether the density of approved developments was too high.

“Most developers were coming in for medium-density multifamily zoning, which allows 29 units per acre,” said Ralph Rognstad, the city’s director of planning and development. “(Council members) thought maybe that was too high in some cases, though staff would say that from an infrastructure standpoint it was OK.”

In September, council enacted a 120-day moratorium on multifamily zoning requests, requiring that they instead be submitted as planned developments. In December, that moratorium was extended for another 120 days.

A 60-member citizen task force also was created to look at the issue, and the group has met five times since September to hash out a set of criteria for appropriate density of future developments.

Rognstad said the group’s goal is not determining how many apartments Springfield needs, but rather how many are appropriate for individual locations.

“We could perhaps sit down and come up with a good estimate, say, ‘We should build another 1,000 units this year.’ But once you arrive at that, how do you figure out who gets to build those and where they should go?” Rognstad said. “We’ve always felt the market should dictate what should be built, and then we deal more with where they should go through zoning particular pieces of property.”

Surge speculation

So what is fueling all of the new apartment units?

Sam E. Coryell Sr. says it’s the city’s general growth, including the industrial parks and the impending new airport terminal, combined with increased interest in Missouri State University since it dropped its multidirectional moniker. He also points to the influx of new residents from other parts of the country.

“We’re getting a lot of people from the West and East coasts moving in, and a lot of them don’t want to deal with yards or plumbing or things like that,” Coryell said. “Some of them are on a fixed income, and they know rent is not going to change dramatically. They can live in an apartment, and it’s fairly easy.”

Matt Bailey, president of Bailey Co., said most of the demand for his company’s apartment units in Springfield also comes from college students, though he also pointed to recent increases in the prices of starter homes as a driver of apartment demand.

“When housing is harder to reach in affordability for first-time buyers, they’re going to look at an apartment,” Bailey said. “We do surveys of our tenants to see where they come from, and a lot of them say they can’t find a home where they want to be for the right price. It’s harder to get loans for first-time buyers, and that also drives people to apartments.”

Bailey knows about the single-family market; his company also builds new homes, ranging in price from $200,000 to $2 million. He said he doesn’t try to sell his apartment dwellers on a new home.

“We’ll mention it, but I don’t sell it really hard,” Bailey said. “Most times, they’re looking to buy, not build. We let them know the option is there, but that’s about it.”

It’s unclear what the current apartment vacancy rate is in the city. Coryell said about 2 percent of his 1,500 apartments are available. Bailey said his company’s 300-plus Springfield units run between 90 and 95 percent occupied.

Rognstad said the city gets different rates from different owners, adding that some may slightly inflate their vacancy rates to discourage competitors from building additional units.

The future

It’s also unclear whether the apartment market will continue to grow at the current rate. Rognstad said there have only been a couple of proposed planned developments since council implemented its multifamily moratorium, though he’s not sure whether that’s a sign of a slowing market or the fact that most builders are already working on other projects.

“It might be that there were so many last year, that everybody is busy now building units, and we won’t see any (new proposals) for a while,” Rognstad said.

The national multifamily housing market seems to be slowing; the November Multifamily Stock Index, a National Association of Home Builders survey of publicly traded multifamily housing company stocks, dropped 0.5 percent from October – the first decrease since May.

Despite the apparent national slowdown, apartment builders in Springfield aren’t stopping. Coryell is developing a second phase of Orchard Park, across from the T-Mobile facility at Interstate 44 and North West Bypass, and is also working on Coryell Courts near Glenstone Avenue and I-44.

Bailey said his company also has plans to build about 300 more apartment units in the next year.

Coryell said he thinks there’s still room for additional apartments in Springfield – in the right areas.

“If you build a nice apartment, reasonably priced in a good location, and you know what you’re doing on the management side, you’re going to be able to do business in Springfield because of the growth,” he added. “The secret of Springfield’s out a little bit, but I think that could be a good thing.”