Inside the Apartment Construction Boom

Despite the delays and problems with financing, construction is booming and expected to bring some of the best years on record, according to Yardi Matrix’s annual apartment construction report on its RentCafe site. Building during and after the pandemic has added 1.2 million apartments over the last three years. This year’s numbers suggest a new peak year for construction as developers open 460,860 rentals by year-end. Such growth hasn’t been seen since the 1970s. 

New York has taken the lead this year, followed by the Texas cities of Dallas and Austin. New York is predicted to have 33,00 new rentals by the end of this year.

 Overall, the number of deliveries is expected to remain high until 2025 when the current challenges will start to affect construction. Bank credit being tightened and rising costs of construction, labor and land all will make new projects harder to get underway, said Doug Ressler, Senior Analyst & Manager of Business Intelligence at Yardi Matrix. New apartments are predicted to drop to 408,000 that year. 

In the meantime, why so much building at a challenging economic time when there also have been shortages of materials and labor? The report attributes it to household growth as jobs boomed, young adults moved from their parents’ homes to their own and work-from-home increases prompted renters to form new households for more living and workspace to accommodate offices, children and pets, according to Ressler.

Almost two-thirds of the new ones during the pandemic boom are grouped in 20 high-growth metros, which comprise 41% of the total renter population. Also, many of the new apartments are out of the financial reach of many needing them. About 89%, the report said, are high-end and targeted to upper-middle and high-income renters.

Dallas topped the list for apartment construction since 2020, followed by New York and Houston. In the New York metro this year, almost one-third will be in Brooklyn, where so many hip millennials and others want to live, followed by Queens (the new Brooklyn) and then Manhattan. The reason the area is faring well is because of its long-standing housing shortage and pent-up demand, the report said. Moreover, New York is the only Northeastern location in the top 20 metros for apartment construction this year.

Despite the huge numbers, they are not sufficient to keep up with demand. As proof, the report cited the case of the Miami metro area where 24 renters competed for the same apartment, the largest number of prospective renters per available unit in the country.