Demand for multifamily housing is expected to remain strong in the foreseeable future. But multifamily construction, which has been well above “normal” levels, is likely to slow a bit, which could impact rental rates.
At the recent International Home Builders Show in Las Vegas, the National Association of Home Builders (NAHB) unveiled its latest projections for home starts and sales. The association’s members had just come off of a year in 2014, when single-family home sales jumped by 29.3% to 436,000 units, according to Census Bureau and National Association of Realtor estimates. Builders started a total of 993,000 homes in 2014, 6.7% more than the previous year.
Over the past few years, housing starts have fallen short of NAHB’s predictions about a housing recovery. Last year, single-family starts were just north of 638,000 units, or about 3% more than in 2013. But the association now thinks housing is poised to take off in 2015, and expects single-family starts to rise by 26% to 804,000 units.
NAHB is less gung-ho about multifamily construction, which “has been producing more units than in previous cycles,” observed David Crowe, the association’s chief economist. His forecast shows multifamily starts reaching 358,000 units in 2015, or only 1.7% more than last year. In 2016, the association expects multifamily starts to hit 361,000 units, or just 0.8% more than the starts in 2015.
Looked at another way, NAHB expects multifamily starts from the third quarter of 2014 through the end of 2016 to be 105% of “normal” production (“normal” being based on the average of quarterly production in the years 1995 through 2003). Over that same period of time, NAHB sees single-family starts going from 49% of normal production (which it remains convinced lies somewhere between 1.3 million and 1.4 million units) to 90%.
What remains to be seen is where the equilibrium between multifamily construction and demand finally settles. The vast majority of multifamily development is currently for rental properties. Despite low interest rates, and predictions that younger adults still want to own homes eventually, rental options remain attractive to a lot of people, particularly those who prefer to live nearer to urban centers.
But if construction slows, and rents escalate in response to scarcer availability, multifamily could reach a point of diminishing return that pushes renters into the buyer column quicker.
Related Stories
Transit Facilities | Dec 4, 2023
6 guideposts for cities to create equitable transit-oriented developments
Austin, Texas, has developed an ETOD Policy Toolkit Study to make transit-oriented developments more equitable for current and future residents and businesses.
Multifamily Housing | Nov 30, 2023
A lasting housing impact: Gen-Z redefines multifamily living
Nathan Casteel, Design Leader, DLR Group, details what sets an apartment community apart for younger generations.
Products and Materials | Nov 30, 2023
Top building products for November 2023
BD+C Editors break down 15 of the top building products this month, from horizontal sliding windows to discreet indoor air infusers.
Engineers | Nov 27, 2023
Kimley-Horn eliminates the guesswork of electric vehicle charger site selection
Private businesses and governments can now choose their new electric vehicle (EV) charger locations with data-driven precision. Kimley-Horn, the national engineering, planning, and design consulting firm, today launched TREDLite EV, a cloud-based tool that helps organizations develop and optimize their EV charger deployment strategies based on the organization’s unique priorities.
MFPRO+ Blog | Nov 27, 2023
7 ways multifamily designers can promote wellness in urban communities
Shepley Bulfinch's Natalie Shutt-Banks, AIA, identifies design elements that multifamily developers can use to maximize space while creating a positive impact on residents and the planet
MFPRO+ New Projects | Nov 21, 2023
An 'eco-obsessed' multifamily housing project takes advantage of downtown Austin’s small lots
In downtown Austin, Tex., architecture firm McKinney York says it built Capitol Quarters to be “eco-obsessed, not just eco-minded.” With airtight walls, better insulation, and super-efficient VRF (variable refrigerant flow) systems, Capitol Quarters uses 30% less energy than other living spaces in Austin, according to a statement from McKinney York.
MFPRO+ News | Nov 21, 2023
California building electrification laws could prompt more evictions and rent increases
California laws requiring apartment owners to ditch appliances that use fossil fuels could prompt more evictions and rent increases in the state, according to a report from the nonprofit Strategic Actions for a Just Economy. The law could spur more evictions if landlords undertake major renovations to comply with the electrification rule.
MFPRO+ News | Nov 21, 2023
Underused strip malls offer great potential for conversions to residential use
Replacing moribund strip malls with multifamily housing could make a notable dent in the housing shortage and revitalize under-used properties across the country, according to a report from housing nonprofit Enterprise Community Partners.
MFPRO+ News | Nov 21, 2023
Renters value amenities that support a mobile, connected lifestyle
Multifamily renters prioritize features and amenities that reflect a mobile, connected lifestyle, according to the National Multifamily Housing Council (NMHC) and Grace Hill 2024 Renter Preferences Survey.
Sustainability | Nov 20, 2023
8 strategies for multifamily passive house design projects
Stantec's Brett Lambert, Principal of Architecture and Passive House Certified Consultant, uses the Northland Newton Development project to guide designers with eight tips for designing multifamily passive house projects.