The rental housing construction market is gradually improving, according to the National Multifamily Housing Council’s quarterly construction survey in September. However, construction and development firms are still facing hurdles.
Over half of the survey respondents, 52%, still reported construction delays; however, this share has fallen for five consecutive quarters from 90% in June 2023. Economic uncertainty was the top reason for delays in starts over the last three months for 92% of respondents, up from 73% in the previous quarter. In addition, 55% of respondents cited additional project requirements unrelated to construction being imposed by their jurisdictions, which is down from 70% in the previous quarter.
According to the Census Bureau, multifamily starts for properties with five or more units have declined 37.1% between the second quarters of 2023 and 2024. According to the NMHC, existing affordability challenges will worsen if construction doesn’t pick up even with the current completions.
“Respondents indicated that challenges persist due to economic uncertainty, although many responded with optimism about medium- to long-term conditions,” noted the NMHC. “Further, the Fed’s interest rate cut this month—along with expectations of future cuts—will hopefully stimulate investment in new construction.”
Looking ahead to the next three months, 68% of respondents expressed confidence that overall multifamily construction market conditions will remain the same, while 18% said they expect conditions to improve. Fourteen percent said they expect conditions to decline, which is the same percentage as in June.
Even more so than in the June survey, respondents are optimistic about the medium to long term: 39% said they expect overall multifamily conditions to improve over the next three to six months compared with 28% in the prior quarter, while the majority of respondents, 78%, expect conditions to improve over the next six to 12 months.
“The September findings make it clear that while we are witnessing slow improvements, rental housing providers continue to face real challenges when it comes to the construction of new communities,” said NMHC president Sharon Wilson Géno. “Economic uncertainty, high interest rates, rising insurance costs, as well as high state and local taxes all continue to hamper badly needed building or even make projects infeasible.”
She added that lawmakers need to implement housing solutions that will work, including removing barriers to building and incentivizing needed construction, and reject regulatory proposals that increase housing costs.
