According to prior reporting and data analysts from MRI ApartmentData, three apartment complexes have opened in the Lake Houston area since February. Meanwhile, two projects are under construction and seven more have been proposed.
Real estate experts said developers and investors began planning multifamily projects two or three years ago when interest rates were at record lows. Bruce McClenny, industry principal for MRI ApartmentData at MRI Real Estate Software, said because of this trend, he saw more apartment complexes open in 2023 and 2024 than he has in his entire career.
The spike in multifamily housing can likely be attributed to factors such as regional population growth, job growth and nearby retail development, said Steven Spillette, president of real estate research and planning firm Community Development Strategies.
“At a very basic level, we just have to have housing for everybody that is coming here or ... emerging here because they’ve been born,” Spillette said.
According to MRI ApartmentData and previous Community Impact reporting, some projects that opened recently include:
- Bluewater At Balmoral: a 92-unit rental townhome community that opened in April
- Eleve: a 322-unit apartment complex that opened in February
- The Residences at Kingwood: a 289-unit apartment complex that opened in February
Patrick Jankowski, chief economist and senior vice president of research for the Greater Houston Partnership, said in a May update that Houston has shifted from a landlord-friendly market to a tenant-friendly market because:
- Average multifamily occupancy is below 90%.
- Rental rates have fallen over the last year.
- Incentives such as free rent and security deposit waivers are prominent.
“An industry rule of thumb holds that Houston absorbs one apartment unit for every six jobs created,” he said in the report. “At the current pace of construction, Houston will need to create roughly 114,000 jobs to absorb what’s currently under construction.”
Roughly 80,700 non-farming jobs were created in the Houston-The Woodlands-Sugar Land area from April 2023 to April 2024, according to data provided by the U.S. Bureau of Labor Statistics.
As more new multifamily housing options are built, this may push older apartments to decrease rent, offer more specials or become subsidized to remain competitive, said Ty Jacobsen, a senior market and Geographic Information System analyst for CDS.
Managing the impact
John McMahon—vice president of High Street Residential, developer of The Residences at Kingwood West, which opened in March—said the Lake Houston area is an attractive area for developers.
“The residents represent a wide array of people that work in all different types of industries across Houston, whether that’s people near the Port of Houston, people downtown in professional services, people that go west for oil and gas jobs,” he said.
Additionally, McMahon noted the influx of available apartment units in the area has led to more competitive price points for renters.
“We’ve seen a lot of supply in that area,” he said. “If anything, the competition has just made the prices between all the communities competitive.”
McMahon said The Residences at Kingwood West also offers four weeks free on all new leases as an added incentive for prospective tenants.
The Houston Association of Realtors reported only 40% of Greater Houston-area households could afford a median-priced single-family home in the first quarter of this year.
Median monthly mortgage payments in the first quarter were $2,060 in Humble and $2,560 in Atascocita, according to HAR—about 3.5% and 19.6% higher than the median base apartment rents for those areas, respectively.
What to expect
Because interest rates have roughly doubled since early 2022, the cost of financing new apartment projects is much less sustainable for developers today, McClenny said.
“[Higher interest rates] causes a lot of problems for a lot of companies to have to ante up more capital to cover that,” he said.
For projects to reach completion recently, developers and investors must have been planning the projects and purchasing land at least two to three years ago, Spillette said. However, rising interest rates have caused the market to slow.
“We are having a pause because of what’s happened to interest rates, and developers have [had] ... a lot more difficulty getting financing in the last year to start new projects,” he said.
Contributions by Jovanna Aguilar, Cassandra Jenkins, Emily Lincke & Danica Lloyd
