Multifamily Gains Lead Housing Construction Boom

U.S. apartment construction is experiencing a boom, which is turning out to be one of the best years on record. The Pandemic slump, then boom, added 1.2 million multi-family units to the market over the last three years and are further predicted to to open an additional 460,860 rentals by the end of the year. 

According to RentCafé, notably, the New York metro area has once again taken the lead this year, with Dallas and Austin, TX, following at a great distance. 

RentCafé base their data on their Yardi Matrix data product which shows that the number of deliveries is expected to remain high until at least 2025 “when the echos of the current economic headwinds will begin affecting construction as well,” But so far, in the last three years, America has been benefiting from a construction boom not seen since the 1970s. 

The drive for multi-family housing partly came from Millennials and Gen Zers got jobs during the post-pandemic boom and moved out of their parents home. At the same time, “work-from-home prompted renters to form their own households to gain more living space for offices, children and pets”, said Doug Ressler, manager of business intelligence at Yardi Matrix. 

Putting that a different way, developers are working tirelessly to complete projects that were approved for construction at the height of the pandemic in order to meet the needs of renters seeking more options as single-family homes are now overpriced and hard to come by.

Further, almost two-thirds of the apartments build during the pandemic are clustered in just 20 high-growth metropolitan areas, which make up about 41% of the total renter population in the U.S. Therefore, for many other places, the new supply barely made a dent in the existing supply. What's more, around 89% of the apartments completed in the last three years are high-end and, thus, target upper-middle- and high-income rentersz Therefore, for many other places, the new supply barely made a dent in the existing supply. What's more, around 89% of the apartments completed in the last three years are high-end and, thus, target upper-middle- and high-income renters 

Looking at the top metro areas for apartment construction since 2020, Dallas claims the first spot, with New York and Houston coming in second and third place, respectively. Zooming in to the city level, highly popular Austin takes the crown with the most apartments built in the last three years, followed very closely by Houston — all the while New York’s most prominent boroughs failed to enter the top 20 in this category. 

“Construction debt starts at 8% interest, and most banks only lend 60% or less of the total cost of a project. Junior construction debt is even more expensive, with interest rates in the mid-teens. This financing structure can make it challenging for companies to initiate new construction projects unless they already have a substantial amount of capital on hand,” said Doug Ressler Senior Analyst & Manager of Business Intelligence for Yardi Matrix. 

Click here to view the entire report, including charts and graphs of apartment hotspots and future growth.