Apartment shortage is a threat to Md. economy


The two biggest long-term threats to Maryland's economy are an eventual decline in federal spending and a growing shortage of affordable housing for future workers.

The first we can't do anything about. The second we can. All jurisdictions in the Baltimore-Washington corridor should strongly promote apartment construction or risk wasting our brilliant potential because of a lack of talent.

Growth happens at the margin, on the edge of the economic base. Apartments house the marginal worker: young, footloose and able to swoop into labor vacuums, especially vital technology jobs. Apartments thus furnish "liquidity" for a work force the way a good trade-processing operation lubricates a stock market.

Not coincidentally at a time when many companies can't fill jobs, Maryland is running low on apartments. Land costs, zoning restrictions and condominium conversions have caused apartment growth to trail demand, driving up rents.

At 3 percent or less, Baltimore-Washington apartment vacancies are among the lowest in the country, reports Delta Associates, an Alexandria, Va.-based consultant. Anne Arundel County's vacancy rate of 2.3 percent is less than half what it was last year.

The Census Bureau says Maryland was one of the few states with falling rents in the 1990s. Now rents are rising at close to twice the inflation rate in some cases. The average metropolitan Baltimore rent of $1,219, as reported by Delta, requires a tenant income of at least $50,000, according to affordability formulas.

Apartment scarcity was the big reason that Town & Country Trust, a Baltimore-based apartment company, sold this year for what many considered an amazingly high price of $1.4 billion.

Apartment buildings are rising but not fast enough. Last year, 3,227 new units became available in Central Maryland, according to the Baltimore Metropolitan Council. That was the second-biggest increase in at least six years. But it overstates the net increase because many older apartments are being switched to condominiums.

Even at face value it hardly looks big enough to fix what the Maryland Department of Housing and Community Development forecasts will be "a shortage of 157,000 work force-affordable rental units" over the next 10 years. In metropolitan Washington, Delta reports, "the pipeline of coming apartment product has been thinned out dramatically in the past five years," although there are signs of an uptick in the Maryland suburbs.

In a report scheduled to appear Tuesday, the Maryland Association of Realtors will warn that the "Maryland housing crunch will get worse" thanks in part to population growth outpacing new housing. The Realtors have an interest in pushing for home construction, but the problem is real.

It's not like we don't know more jobs are coming. The Pentagon's base realignment process reportedly will bring more than 40,000 private and military jobs to metropolitan Baltimore. Those jobs are mandated by law and are coming no matter what. The risk for Maryland is that they'll make the housing problem worse and compel other employers - those who have a choice - to create jobs elsewhere.

Maryland's biotechnology business seems to be coming into its own. The Web economy is coming back. Maybe telecom will thrive again. Add to that healthy potential in services, finance, health care and transportation, and you have the makings of a sustainably prosperous commercial climate.

But companies are complaining that growth is constrained by a lack of workers. Last week, my colleague Stacey Hirsh reported that Baltimore-region technology companies are virtually stalking potential employees to fill open slots.

The market is starting to work. High rents are prompting interest in apartment construction. But it needs to be helped in ways beyond the Ehrlich administration's laudable attempts to improve residential financing and switch renters into owned homes.

Localities need to take a hard look at expanding apartment zoning, and state authorities should help them do so in a concerted way. More apartments need not bust Smart Growth strictures, either. Putting more people in less space is what Smart Growth is about.

Maryland is doing so many things right: maintaining a great university system, focusing development on high-potential, high-payoff industries, corralling research dollars, improving transportation. Even our taxes don't look so bad anymore, on a relative basis.

It would be a shame for these investments to fall short for the lack of enough one- and two-bedroom flats.


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