Despite Challenges, Apartment Construction Continues To Boom

Despite ongoing materials and labor shortages, apartment construction continued on pace this year, with more than 330,000 new rental units expected to be delivered coast to coast by year’s end. 

“These figures reflect the striking difference between the aftermath of the pandemic crisis and that of the housing crisis of 2008: In 2021, there were nearly three times more apartments under construction than there were in 2011,” according to a new report from RentCafe.

And the amount of new deliveries—as estimated by Yardi Matrix—represents just a 2.5% decrease in new units over 2020 figures. That’s a decent pace under the circumstances, according to Yardi’s Doug Ressler. 

“The pandemic shifts and resurgence of the residential rental market bring new residential supply into focus,” Ressler told RentCafe in an interview. “Lack of entry-level housing supply and rising home prices will show the multifamily rental market demand increasing as new renters enter the market and Millennials extend their rental commitments.”

The Dallas-Fort Worth, New York, and Phoenix metro areas are leading the pack in terms of deliveries, with DFW predicted to deliver the most units for the fourth year running. Charlotte and Orlando are also posting higher-than-usual projections.

“The strong demand fueled by robust inbound migration and employment growth” is the reason we’re seeing such high levels of construction in these markets, according to Ressler. “The Southwest market which meets both these conditions is Phoenix. In addition, Phoenix zoning and availability of land is adding to the attraction.”

San Francisco, Tampa, San Jose, Kansas City, Mo., and Raleigh are also all on track to deliver between 5,000 and 8,000 new apartment units this year.

Meanwhile, construction rates in Denver are down by nearly half, followed by Seattle.

Approximately 21,410 apartment units were completed in Q2, according to data from Moody’s Analytics REIS. More than 2 million people found employment this quarter, a key driver of multifamily performance, and supply during the quarter was limited, clocking in at 60,000 new units delivered. Moody’s economist Thomas LaSalvia predicts “solid rent growth” for the remainder of the year in the sector.