Nationwide Construction Boom Expected to Remain High Until 2025

Apartment construction in the U.S. is experiencing its best years on record, as the pandemic building boom brought 1.2 million apartments to the market in the last three years, according to a new study from RentCafe.

While 2023 is shaping up as a new peak year for construction, developers are expected to open 460,860 rentals by the end of December. More notably, the New York metro area has taken the lead yet again this year, with Dallas and Austin, TX, trailing closely behind. Despite economic headwinds, another 1 million new rentals are set to be completed through 2025.

Top 10 U.S. Metros for New Apartments in 2023

1. New York
2. Dallas
3. Austin, TX
4. Miami
5. Atlanta
6. Phoenix
7. Los Angeles
8. Houston
9. Washington, DC
10. Denver

Rounding out the top 20 metros for apartment construction in 2023 are: Charlotte, NC; Raleigh, NC; Orlando, FL; Seattle; Nashville, TN; Tampa, FL; San Francisco; Jacksonville, FL; Minneapolis; and Chicago.

Is a construction boom approaching?

RentCafe's annual apartment construction report based on Yardi Matrix data shows that the number of developments is expected to remain high until 2025, when further economic headwinds are projected to begin affecting construction. In the past three years, America has significantly benefited from a construction boom unseen since the 1970s.

Households grew at a rapid rate after the pandemic as job growth boomed and young adults moved out of their parents’ homes. 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, Senior Analyst and Manager of Business Intelligence at Yardi Matrix.

That said, developers are working hastily to complete projects approved for construction at the height of the pandemic in order to meet the needs of renters seeking more apartments.

Apartment construction is booming, but headwinds await new completions in the coming years

In addition, supply growth is projected to slow after the current round of projects is completed.

"Tightening of bank lending standards—combined with rising costs of construction materials, labor, and land—has made new projects harder to pencil," said Ressler. "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."

Overall, the share of new apartments is expected to drop by 15% year-over-year—from 484,000 in 2024 to 408,000 in 2025—with new completions bottoming out in 2026 at approximately 400,000 units. Moreover, according to Yardi Matrix estimates, the pace of construction is projected to gradually recover in 2027 and 2028.

New York leads the country in apartment construction once again, with 33,000 units to be opened in 2023

New York is ranked America’s #1 builder in 2023, with no less than 33,000 new rental units set to come online by the end of the year, according to RentCafe data. Almost one-third (9,825 units, respectively) of the apartments that will be added throughout the metro this year will be located in Brooklyn, while an estimated 4,430 rentals will be opened in Queens and 3,770 rentals will be completed in Manhattan.

New York is the only Northeastern location in the top 20 metros for apartment construction in 2023.

Hot on the Big Apple's trail—with almost 10,000 fewer apartments than the #1 contender—is the Dallas metro, where developers are on track to build 23,659 new rentals by the end of the year. Dallas is expected to add 4,176 new apartments in 2023, followed by Fort Worth, TX, with 2,469 apartments, and Frisco, TX, with 2,296 apartments.

However, research showed that simply won't be enough to meet the surging, nationwide demand for apartments throughout the metro. Notably, Dallas gained more residents than any other U.S. metro between 2021 and 2022 alone, according to U.S. Census data. Despite a severe shortage of housing units, more and more people are expected to relocate to this thriving area in the coming years.

In Austin (ranked #3), another fast-growing Texas metro, developers are set to open 23,434 new rentals by the end of 2023. The Live Music Capital of the World's existing supply is also struggling to keep up with demand as hundreds of new residents are relocating to the area each day.

In comparison, apartment construction is slower in Houston, the fourth Texas location in RentCafe's top 20 list of best metros for apartments in 2023. The densely-populated Texas metro is estimated to add 13,637 new apartments this year, landing eighth place in the ranking. However, Houston (along with Dallas, Austin, and San Antonio) is focused on building single-family rentals to meet the needs of those who are not yet ready or cannot afford to become homeowners.

Where will majority of units be built in Florida? 

Next, the Miami metro is in fourth place for new apartments projected to be completed by the end of 2023, with 20,906 units in total. The majority of these new rentals will be built in Miami itself (9,362 units), followed by highly desirable Hialeah, FL (2,055 units), and West Palm Beach, FL (1,175 units).

Once again, the upcoming apartments are not enough to keep up with the skyrocketing demand for housing, even though developers will open about 30% more new rentals this year compared to 2022. As a matter of fact, this rental season again, competition is so fierce in the Miami metro that a staggering 24 renters are competing for the same apartment. That’s the largest number of prospective renters per available unit in the country.

Approximately 1 million apartments were built in the last 3 years, with another 1 million units expected through 2025

Developers rose to housing demand challenges and delivered an outstanding 1.2 million new apartments between 2020 and 2022. The peak of this construction boom was in 2021, when nearly 440,000 brand-new units opened nationwide.

So, what areas completed the most apartments?

Key Findings:

• Dallas built the most apartments during those three years—a whopping 76,660 units—as developers across the metro hustled to finish projects that were approved during the pandemic.
• Next up is the New York metro area, which opened 66,070 brand-new apartments between 2020 and 2022 in an effort to provide much-needed housing to newcomers and existing residents alike. Additionally, the metro continued to see strong demand for rentals even after the pandemic, despite the fact that many high-paying professionals who were working remotely chose to relocate to sunnier places, like Florida, North Carolina, and Texas.
• Given North Jersey’s growing popularity with renters, Jersey City, NJ, lands in 20th place with 8,083 new apartments added during those three years. Brooklyn comes right after it with 7,859 new rentals (#21), while Manhattan (#28) and Queens (#34) lag quite far behind with 6,403 units and 5,489 units, respectively.
• Coming in third is Houston, where developers opened 53,741 new apartments between 2020 and 2022. The metro is also home to several major companies, such as ExxonMobil and Chevron, both of which expanded their presence in the area during those three years and attract a large number of workers, further supporting demand for rental apartments.
• Likewise, the Austin metro opened a little more than 45,000 apartments during that same timeframe, claiming fourth place in our ranking. Backed up by its business- and tax-friendly climate, Austin has evolved into "the place" for unicorns and tech giants in recent years, consequently attracting many techies from California and other states.
• Rounding out the top 5 is the Miami metro, where developers built almost 43,000 new apartments in the last three years. However, even with this influx of new units, the supply of apartments is still not enough to meet demand in this sought-after destination for renters.

Which cities topped the chart for apartment construction between 2020 and 2022?

At the city level, Austin led the nation in apartment construction between 2020 and 2022, adding a whopping 29,115 new units. Construction peaked in 2022, with 11,546 units added that year. Houston was not far behind, with 28,423 new rentals opened in the same period. And just like its sibling, Bayou City saw its highest number of completed apartments in 2022, with 11,165 units added to the market.

Next, Atlanta boosted its apartment supply by 17,886 new rentals from 2020 to 2022. Here as well, the city's busiest year for construction was 2022, when 7,542 new units were opened.

Interestingly, Los Angeles saw a construction boom of its own between 2020 and 2022. Developers built a combined 17,779 new apartments during those three years, pushing the city to fourth place in our ranking at the city level. However, that’s not enough to alleviate Los Angeles’ historic housing shortage anytime soon, according to RentCafe experts.

Rounding out the top 20 cities for apartment construction between 2020 and 2022 are: Washington, DC; Charlotte, NC; Miami; San Antonio; Seattle; Chicago; Denver; Nashville, TN; Orlando, FL; Phoenix; Columbus, OH; Portland, OR; Fort Worth, TX; Minneapolis; and Jersey City, NJ.

Moreover, the housing shortage is projected to further deepen as the city is expected to grow by 400,000 residents by 2029. This means that even if developers were able to build new housing units at a faster pace, it still wouldn't be enough to meet the demand.

To read the full report, including more data, charts, and methodology, click here.