Significant market headwinds—including delays in construction, a lack of financing options, and economic infeasibility of projects—continue to hamper multifamily developers.
Delays are still prevalent for developers. According to the National Multifamily Housing Council (NMHC) Construction Survey in December, 84% of respondents reported construction delays; however, that figure is slightly improved from the prior two quarters. Of those who reported delays, 81% cited delays in permitting and 92% noted start delays.
Conducted between Dec. 5 and 12, the NMHC quarterly survey found that of those experiencing delayed starts, the primary cause cited by 83% of respondents was economic uncertainty, up from 57% the prior quarter. This was followed by 79% of respondents citing the availability of construction financing, slightly up from 78% in the prior quarter, and 71% citing economic infeasibility, up from 61%.
Rising material costs also continue to be an issue for developers. Respondents reported that pricing for electrical components jumped 11% and appliances were up 7% on average over the prior quarter. However, lumber prices dropped for a seventh consecutive quarter, down an average of 3% over the last three months.
Results related to the construction labor market have been mixed but show signs that it may be stabilizing. Nearly three-quarters of respondents, 74%, reported construction labor to be roughly the same as the prior quarter; only 3% of respondents reported construction labor to be less available, while 19% reported construction labor to be more available.
“This continues to be a challenging construction market for rental housing providers,” said NMHC president Sharon Wilson Géno. “High interest rates, rapidly increasing insurance costs, skyrocketing state and local taxes are all coming together to make it difficult to build new housing despite the need for more housing of all types in communities throughout the country.”
Due to the difficult market headwinds, Wilson Géno urged lawmakers to take action. “Because of these tough market conditions, lawmakers should act on policy options they can pursue to expand housing supply and lower costs, including expansion and reform of affordable housing programs, relief on insurance costs, and other initiatives that will improve capital market conditions,” she added.
