Permits to build multifamily housing units are down 27.1% from the pandemic boom, according to a new report from Redfin, which analyzed U.S. Census Bureau data covering permits for buildings with five or more units.
Over the past year, developers have obtained permits to build 12.4 multifamily housing units for every 10,000 people, down from 17 units during the COVID building boom and 13.1 units in the years leading up to the pandemic.
During the pandemic, developers ramped up building activity to meet the surge in rental demand, especially in strong Sun Belt metros like Austin, Texas, and Tampa, Florida. That led to record new supply coming online last year. However, with rents flattening and borrowing costs high, multifamily building has become less attractive for builders.
“New apartments are being rented out at the slowest speed on record, and builders are pumping the brakes because elevated interest rates are making projects prohibitively expensive,” said Redfin senior economist Sheharyar Bokhari. “At some point in the next year, the slowdown in building will mean that renters have fewer options—potentially leading to an increase in rents.”
Even with falling rents, Austin remains a hot spot for developers. The Lone Star State capital granted permits to build 64.5 units for every 10,000 people over the past year. According to Redfin, that’s the highest level among the 78 metros with populations of at least 750,000 that it analyzes.
The Sun Belt markets of Cape Coral, Florida; North Port, Florida; Raleigh, North Carolina; and Orlando, Florida, round out the top five for multifamily permitting.
Stockton, California, came in as the lowest of the metros analyzed, recording 0 new permits issued in the last year, down from 5.7 units per 10,000 people during the pandemic. Bakersfield, California; El Paso, Texas; Providence, Rhode Island; and Baton Rouge, Louisiana, also posted big declines for permitting over the past year.
The Redfin report noted that nearly two-thirds of the metros analyzed posted a decline in multifamily construction since the pandemic boom. While Stockton saw the biggest drop, Colorado Springs, Colorado; Boise, Idaho; Minneapolis; and Jacksonville, Florida, all saw steep declines in permitting compared with the COVID building era.
Several markets saw increases. Although still below the national average of 12.4 units permitted per 10,000 people, Oklahoma City grew 193% from 1.7 units permitted during the pandemic to 5.1 over the past year. Pittsburgh and Hartford, Connecticut, also saw growth, up 184% to 8.8 units and 102% to 9.4 units, respectively.
