According to the National Association of Home Builders, despite increasing demand for multifamily properties, construction starts rose just 1% to 381,000 and are expected to increase just 1% more to 383,000 in 2020, though an increase of 4% is expected in 2021.
Like all recent stories about the struggles in construction, these problems can be attributed to lack of skilled labor, rising cost of materials, and increasing regulatory costs, according to NAHB economist Danushka Nanayakkara-Skillington at the International Builder’s Show in Las Vegas at the end of January. To stay working in spite of these obstacles, builders are moving to luxury condominiums, which that can produce fewer of at a higher resale value, but at the expense of affordable housing options.
Although starts have slowed to an almost plateau, U.S. year-over-year multifamily permits increased by 11.1% in 2019. Alabama, Connecticut, and Nevada saw the largest increases, at 88.7%, 80.8% and 65.1% respectively. North Dakota saw the biggest drop, of 50.5%.
Demand is high for multifamily housing. Experts say that millennials are continuing to live with roommates longer than previous generations, opting for multifamily housing rather than single-family houses. Baby Boomers are retiring and moving to from single-family homes to easier-to-manage condominiums and apartments. And Gen Z is just starting to begin renting.