The annual pace of multifamily permitting increased dramatically at the end of 2021.
Between November and December, the seasonally adjusted annual rate for multifamily permits jumped 19.9% to 675,000 units, almost 42% greater than what was seen in 2020, according to the U.S. Census Bureau.
Most of that recent bump came in the Northeast region where the change in Philadelphia’s residential development tax abatement program spurred a flood of multifamily permitting, much like what happened in New York in 2008 and again in 2015.
Multifamily starts were up as well, but the 13.7% increase in the rate for starts was smaller. Still, the annual total of 524,000 multifamily units started in 2021 was 56% greater than in 2020.
Meanwhile, single-family permitting and starts have stalled from their post-pandemic recovery trajectories but remain at sustainable levels. The annual rate for single-family permits ticked up 2% from November to 1.128 million homes, down 8.5% from December 2020. Single-family starts dipped 2.3% from November and were down 10.9% from 2020 to 1.172 million homes.
Together, total residential permits were up 9.1% from November to 1.873 million units and total residential starts were up 1.4% to 1.702 million units. Compared to one year ago, total residential permits were up 6.5% while total starts were up 2.5%.
Multifamily completions fell sharply (-34.3%) from last month to 299,000 units while single-family completions of 990,000 units were up 3.9% from last month’s seasonally adjusted annual rate.
Multifamily units authorized but not started are at their highest level (122,000 units) since the survey began in 1999. Delayed single-family units are also at high levels (144,000 units) not seen since the end of the housing bubble in 2005.
The annual rate for multifamily permitting was up in three of the nation’s four Census regions from 2020, with the largest increase in the aforementioned Northeast (up 183.6% to 204,000 units). The South region’s annualized rate increased 31.7% to 232,000 units, and the Midwest’s rate increased 16.2% to 92,000 units from last December. The West region experienced a slight 0.8% decline in multifamily permitting to 149,000 units. Compared to the previous month, permitting almost tripled in the Northeast (up 194.9%), and was up 38.6% in the Midwest. On the other hand, permitting fell 18% in the West and 6.3% in the South.
Regional annual multifamily starts were up significantly in the Midwest (+257.1% to 88,000 units), and South (+79.3% to 256,000 units). The Northeast region improved by nearly a third (+32.3% to 66,000 units), while the West region had a moderate decrease (-3.3% to 116,000 units). Compared to November’s rate, the regional trends were the same with the West slipping 10.1% from last month’s annual pace, while the remaining regions grew about 17% to 40%.
At the metro level, nine of the top 10 permitting markets returned to the December list from November. New York continues its dominance in multifamily permitting with 34,595 units, close to its pace one year ago but almost 800 units higher than last month.
As mentioned, Philadelphia saw an explosion of multifamily permitting in the month of December due to an impending change in its tax abatement program. Annual multifamily permitting basically quadrupled from 6,770 units in 2020 to 26,449 units in 2021, with almost 12,500 of those units permitted in December alone, boosting the market to the #2 spot.
With the rise of Philadelphia, the next four markets of Austin, Dallas, Seattle, and Denver returned in order but each one spot lower than last month. All four markets permitted from 6,000 to 8,000 units more than last year. Austin’s 25,539 units permitted in 2021 were 36% greater than in 2020, while Dallas and Seattle were up 79% and 56%, respectively. Denver doubled multifamily permitting from 2020.
Houston moved up one spot to #7 with 15,726 units permitted in 2021 but was the only top 10 market with a major decrease in permitting – down 4,132 units from last year. Phoenix and Los Angeles each slipped two spots to #8 and #9 but had annual increases of about 10% from last year with 15,433 and 14,060 units permitted, respectively.
Nashville replaced Washington, DC at the #10 spot with 13,992 units permitted, almost 3,000 more than in 2020 and almost 1,900 of them in December.
Eight of the top 10 multifamily permitting markets increased their annual totals from the year before and they were generally large increases, ranging from a low of 1,237 units in Los Angeles to more than 19,600 additional units in Philadelphia. In fact, half of the top 10 markets increased multifamily permitting by at least 6,300 units over last year’s pace. The remaining top 10 with increasing permitting averaged about 1,800 additional units permitted over last year’s totals.
Other markets outside of the top 10 that saw significant year-over-year increases in annual multifamily permitting in 2021 were Orlando (+4,476 units), Atlanta (+3,970 units), Raleigh/Durham (+3,798 units), North Port-Sarasota-Bradenton, FL (+3,070 units), Miami (+3,036 units), Charlotte (+2,804 units) and Jacksonville, FL (+2790 units).
Only two of the top markets saw decreases in 2021. As mentioned, Houston permitted 4,132 fewer units than last year and New York’s annual permitting fell by just 17 units. Significant slowing in annual multifamily permitting also occurred in the non-top 10 markets of San Jose (-1,669 units), Cape Coral-Fort Meyers, FL (-1,563 units), Columbus, OH (-1,368 units), Lubbock, TX (-1,315 units) and Sacramento (-882 units).
Nine of the top 10 markets had more annual multifamily permits than the previous month, with Philadelphia jumping 89.1% and Nashville up 7.3% from November’s annual total. Despite decreasing from last year, Houston saw an increase in annual permitting in December of 5.3% from last month. The remaining top 10 markets averaged 2.7% increases for the month. Los Angeles had a 6.3% monthly decrease in their annual multifamily permit totals.
The annual total of multifamily permits issued in the top 10 metros – 198,204 – was about 34% more than the 147,667 issued in the previous 12 months. The total number of permits issued in the top 10 metros was almost equal to the number of permits issued for the #11 through #39 ranked metros.
Below the metro level, eight of last month’s top 10 permit-issuing places returned to this month’s list with the first seven remaining in the same order. The list of top individual permitting places (cities, towns, boroughs, and unincorporated counties) generally include the principal city of some of the most active metro areas.
The city of Philadelphia shot to the top of the list in December with an annual total of 22,776 units as the aforementioned tax abatement policy change caused a flood of permitting to close the year.
Austin returned, but as the #2 permit-issuing place, with 14,235 units, up about 900 units from last month. The city-county of Nashville-Davidson and the city of Los Angeles returned in order, permitting 12,260 units and 10,711 units, respectively. The cities of Seattle, Denver and Houston remained in the #5 through #7 spots but only the city of Denver had a significant increase in annual permitting over last month (+474 units).
Mecklenburg County (Charlotte) took the #8 spot with 7,244 units permitted, almost unchanged from last month. The city of Dallas moved into the top 10 list with 7,031 units permitted in 2021, which was 788 more than last month’s total. The borough of Brooklyn moved down a spot to #10, permitting 300 units more than in November with an annual total of 6,829 units.