Despite a modest month-to-month uptick in multifamily permits in August, the broader trend points to a stark decline in new multifamily construction permits across the United States. On an annual basis, multifamily permitting fell by 16.8%, underscoring the shifting dynamics in the real estate sector, even as multifamily completions surged. This drop in permits, particularly pronounced in several key markets, raises concerns for future supply and market stability in various regions.
According to a recent analysis by RealPage Analytics, August saw 8.3% more multifamily permits issued compared to July 2024. However, the long-term view is more concerning, with all U.S. Census regions experiencing a notable year-over-year decrease in multifamily permitting. The West bore the brunt of the decline, with a staggering 42% drop, followed by the Northeast at 22.4%, the Midwest at 9.5%, and the South, which experienced the smallest decrease at 1.4%.
The Decline in Permits Across Major Markets
The decline in multifamily permits wasn’t uniform across the country. Major metro areas, traditionally the engines of multifamily construction, experienced some of the most significant slowdowns. Of the top 10 multifamily permitting markets, all but New York saw annual permitting numbers drop.
Dallas, Houston, and Atlanta were among the hardest hit. Dallas saw the largest decrease, with a reduction of 10,640 units compared to the previous year, while Houston and Atlanta followed closely, with drops of 10,437 units and 6,236 units, respectively. Los Angeles, Washington, D.C., and Raleigh/Durham also posted significant declines, all surpassing reductions of 3,000 units.
In total, the top 10 metros issued 140,593 permits in August, a 23% decrease compared to the year before. These declines were also mirrored by a slight dip of 1.1% from July, further underscoring the challenging permitting environment in these areas.
Markets that traditionally drive multifamily growth—such as Minneapolis/St. Paul, San Antonio, Jacksonville, Portland, Nashville, Denver, Miami, Orlando, Salt Lake City, and Riverside—also saw substantial declines in permit issuance. These markets are grappling with various factors that could be contributing to the slowdown, such as higher interest rates, regulatory challenges, and changes in demand.
A Few Bright Spots in the Permitting Landscape
While the national picture shows a general cooling of multifamily permitting, a few metros bucked the trend. New York, for instance, issued 23% more permits year-over-year. Fort Worth, Greensboro/Winston-Salem, Asheville, Omaha, Knoxville, Milwaukee, and San Diego also saw an increase in permit numbers.
In New York, the permitting surge suggests continued confidence in the multifamily market, driven by high demand and limited housing supply. This rise contrasts with significant declines in other major cities, hinting at regional dynamics playing a key role in shaping multifamily construction trends.
Multifamily Deliveries Surge Even as Starts Decline
Interestingly, the significant drop in multifamily permitting occurs alongside a sharp spike in multifamily unit completions. Over the past 12 months, 740,000 multifamily units were completed, the highest number in over five decades. This represents a 36.5% increase from July’s seasonally adjusted total of 542,000 units and a 79.2% rise compared to August 2023.
Despite this surge in deliveries, multifamily starts tell a different story. New multifamily starts fell by more than 6% year-over-year, totaling 330,000 units. The number of multifamily units under construction also dipped by 850,000 during the same period. This indicates a potential future slowdown in multifamily completions, as fewer new projects break ground.
Single-Family Market Sees an Upswing
While multifamily permitting and starts have seen a significant decline, the single-family sector is showing signs of growth. Single-family starts increased by 15.8% from July through August and 5.2% year-over-year. Completions also rose by 8.4% for the year, totaling 1.029 million units. These figures suggest that developers may be pivoting towards single-family projects, driven by falling interest and mortgage rates.
However, single-family units under construction only dipped slightly, by 0.3% month-over-month, and the number of units authorized but not started rose by 2.8%. This indicates a healthy pipeline for single-family homes, even as the multifamily sector slows.
As multifamily construction permits continue to decline, industry experts will be closely watching how this impacts housing supply, especially in high-demand regions. The drop in new permits could signal tightening inventory in the future, which may lead to higher rents and increased competition for available units.
Meanwhile, the surge in completions may provide some short-term relief for renters as new units come online, but the longer-term outlook depends on how quickly permitting activity can recover, particularly as the market adjusts to changing economic conditions, interest rates, and demand drivers. Investors and developers will need to navigate these evolving dynamics carefully in the coming year.
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