Lessons from the "Missing Middle"

[Tyler Scheutze]

In this week’s blog, I am turning it back over to COLE THOMPSON. He continues with Part Two of his three-part series.

In the ever-changing landscape of residential construction and development in the southeastern United States, adaptability and resilience have been constant companions. As we reflect on the challenges faced during the financial crises of 2007-2012 and draw parallels to the current market conditions of 2024, one concept stands out: the “Missing Middle.”

The term “Missing Middle” refers to the scarcity of housing options between single-family homes and large-scale apartment complexes. This gap in the market has become increasingly pronounced, posing challenges for both developers and consumers alike.

During the Great Recession, the housing market saw a shift towards multifamily rental properties as homeownership became less attainable for many. This trend has continued into 2024, with an increasing demand for rental housing driving up prices and creating affordability challenges for middle-income families.

To address this issue, developers and construction companies have begun to explore innovative solutions such as “Build-for-Rent” projects. These developments offer the amenities and privacy of single-family homes with the flexibility and affordability of rental properties, filling the “Missing Middle” gap in the market.

Another trend that has emerged is the use of light gauge steel construction, which offers durability, efficiency, and cost-effectiveness. This method has gained popularity among developers looking to build affordable housing quickly and sustainably.

Additionally, developers have diversified their portfolios by introducing new product types such as townhomes, duplexes, and triplexes. These smaller-scale developments not only cater to the growing demand for affordable housing but also promote community living, walkability and neighborhood or community revitalization.

Collaboration has been key in navigating these challenges, with developers, lenders, and policymakers working together to find innovative solutions. Strategic partnerships and alliances have enabled industry players to pool resources and expertise, ensuring the success of new projects in a challenging market.

As we look towards the future, it is clear that the “Missing Middle” will continue to be a focal point for residential construction and development in the southeastern US. By embracing innovation, fostering collaboration, and remaining adaptable in the face of adversity, we can overcome the challenges of today and build a brighter future for our communities.