Multifamily Developers Experiencing Construction Delays Spiked to 90% in Q2

Persistent construction and permitting delays along with additional project requirements being imposed by local governments have put a damper on apartment development, according to the National Multifamily Housing Council’s quarterly construction survey of members in June. The survey also showed that 17% of respondents reported construction labor to be less available than three months ago, up from 10% in March.

The results mostly are ​a continuation of what has plagued developers in the past year but with varying degrees.

During the past three months, 90% of respondents reported experiencing construction delays reversing a recent downward trend (79% in March, down from 84% in December and 90% in September).

Respondents experiencing delayed starts were again most likely to cite project infeasibility (62% of respondents, up from 49% last quarter), along with access to construction financing (62% of respondents, up from 40% last quarter), as a cause.

Other hindrances included permitting, entitlement, and professional services (57%) as well as economic uncertainty (52%), both elevated from last quarter, according to the report.

Permitting is taking three to four months, according to 40% of the respondents, with nearly one-third of others saying five to six months. Ten percent of respondents said seven to eight months and more than nine months.

Only material sourcing and delivery as a cause of delay fell, measuring at just 10% from 21% in March, 30% in December, and 53% in September.

One in 10 respondents said staffing shortages were an issue, up from 7% the previous quarter.

After last quarter’s easing in the construction labor market, this quarter’s results were more mixed.

As for having available labor, two-thirds said there’s been “no change” in availability during the past three months.

The share of respondents citing that labor costs increased more than expected rose to 18% percent compared to the prior survey and 18% felt that they had risen less than expected increasing from 7% last quarter to 18% in the Q2 report.

NMHC said the smaller sample size (30 respondents) made it difficult to say with certainty that these mixed results mark a change in last quarter’s softening in the labor market.

As for importing construction goods, 42% of respondents said they are using alternative products and materials and 33% said they are sourcing more products and materials domestically.