Permits for multifamily development dropped in 70% of metros in 2023, according to Point2’s annual Housing Construction Report.
The past year saw over 1.4 million new homes added to the national housing inventory. Despite the 4% growth in units compared to 2022, both the number of new homes under construction and the number of permits dropped year-over-year (YOY).
Permitting for new housing has declined for the second year in a row—down 11% in 2023 according to the Housing Construction Report, a yearly analysis of housing trends by Point2. Similarly, the number of multifamily housing starts dropped 9% YOY.
Overall, 70% of all U.S. metros saw a reduction in permitting last year. What does this mean for multifamily development in 2024?
Permits Issued in Single Family and Multifamily Development
Slow permitting and fewer homes being developed could mean dwindling options for future buyers and renters. This puts more pressure on a market already strained by tight supply, according to Point2.
“Home builders are increasingly affected by rising loan rates and high construction costs, an issue that could send unfortunate ripples through the housing market in the not so distant future,” writes Andra Hopulele, Senior Real Estate Writer, Point2.
That being said, builder confidence may be on the mend according to the recently released National Association of Home Builders/Wells Fargo Housing Market Index (HMI). Mortgage rates falling below 7% signals a positive shift, bringing single-family homebuilder confidence up to 44% in January.
Multifamily Housing Starts in Top U.S. Metros
Only a handful of metropolitan areas saw an increase in permitting in 2023. The three metros with the most permits issued were Phoenix, Ariz., and Houston and Dallas, Texas. Overall, the top three states—Texas, Florida, and California—make up more than one-third of all permits issued last year. On the other hand, 18 states had less than 10,000 permits issued each.
Permits Issued by State
Some states had a significant decrease YOY in number of permits in 2023—as low as 60 percent. The five lowest states include:
- District of Columbia: –60.8% change in number of permits.
- Wyoming: –49.1% change in number of permits.
- New York: –40.4% change in number of permits.
- Alaska: –37.8% change in number of permits.
- Montana: –32.1% change in number of permits.
Meanwhile, only a few states increased their permitting numbers YOY, though the change is much less than those who decreased:
- Connecticut: +12% change in number of permits.
- Tennessee: +11% change in number of permits.
- North Carolina: +7% change in number of permits.
- Vermont: +6% change in number of permits.
- Kentucky: +4% change in number of permits.
While smaller metropolitan areas saw the most dramatic swings in permit numbers year-over-year, this isn't surprising. In these areas, just a few new multifamily housing starts can significantly impact permit totals and housing availability.
However, it’s the larger metros with thousands of homes that can signal broader trends in the industry. Out of the 56 largest U.S. metros, just 10 witnessed a rise in permits. Of those, only seven experienced a more substantial increase, with new home authorizations jumping between 10% and 35%. The remaining 46 large metros saw permitting activity either decline or stagnate.
Source: bdcnetwork.com
