Multifamily Permits Plunge in April

Permits and starts for multifamily product dropped sharply in April, as the pandemic-induced economic recession deepened.

Multifamily permitting dipped to 373,000 units on a seasonally adjusted annual basis in April, the lowest annual rate since April 2016. That number was down 12.4% from March and was 22.6% lower than the rate from the same period in 2019. By comparison, annual multifamily permitting has averaged about 440,000 units since 2015, but stepped up to average closer to 467,000 units over the past 12 months.

Starts of multifamily units, which are more volatile than permits, fell to an annual figure of 234,000 units in April, almost half the 12-month average. This number fell a steep 40.3% since March and was 38.6% below the April 2019 figure. Multifamily starts have averaged close to 378,000 units annually since 2015, but, like permits, have escalated to average 420,000 units in the past 12 months.

The recent drop in single-family permits was deeper, falling 24.3% from March. Compared to February, single-family permits are down by about one-third. But year-over-year, the rate was down only a moderate 16.4%. Single-family starts were down a sharp 25.4% from March’s annual rate and were down a similar 24.8% from April 2019. The lower rate of decline for single-family permits compared to starts may point to a recovery already in the works.

Total residential building permits were down 20.8% from March while total starts were down 30.2% from last month. Starts were hit harder than permits, as worksites felt the shutdown more directly. Total residential starts are about half the level of just two months ago, while permitting is down by less than a third. Compared to April of 2019, total permits and starts were both down by similar amounts (19.2% and 29.7%, respectively).

Typically, single-family permitting and starts account for about two-thirds of total residential construction. For the twelve-months ending in April, that ratio held true for permits, but multifamily starts fell to one-quarter of the total for residential starts.

Multifamily permitting was down in all regions compared to one year ago, with the Northeast region falling 68.5% to just 23,000 units. Also seeing double-digit declines were the West (-19.5%/105,000 units) and Midwest (-12.6%/45,000 units), while the South region dropped 7.8% from last year’s pace to 200,000 units. All four regions are currently below their respective 12-month averages.

Multifamily starts were down even more sharply than permits in all regions of the country. Again, the Northeast fell the furthest, with annual multifamily starts plunging 59.2% from April 2019 to 24,000 units. The West fell 56.6% to an annual pace of 39,000 units, and the South fell 27.3% to 139,000 units. The Midwest retrenched 20.9% to 31,000 units. All four regions were down at least 30% from their respective 12-month averages.

At the metro level, multifamily building permit totals for April will not reflect the same amount of change as in the national data series since the metro data is unadjusted. That seasonal adjustment in the U.S. was greater for April than March and resulted in a larger drop in annual multifamily building permits for adjusted (-12.4%) than unadjusted (-2.2%) permits. That said, the average change in annual multifamily building permits from March to April for the top 10 markets was -1.6%, close to the national rate. However, Orlando replaced Chicago in this month’s top 10 list, so using the same top 10 as last month, the change was -3.5%.

As mentioned, all but one of last month’s top 10 permitting metros remained the same with six markets changing places. The first two returned in order with New York and Houston retaining the top spots. Austin pushed past Dallas, knocking that market out of its normal top 3 spot. The next two, Los Angeles and Seattle, changed places to #5 and #6, while #7 and #8 saw Phoenix and Washington, DC switch spots as well. Minneapolis returned to the ninth position, while Orlando pushed into the tenth spot, knocking Chicago down to #11.

Six of the top 10 markets experienced increases in annual multifamily permitting from last year, with an average increase of 3,100 more permits. Phoenix saw the greatest increase in annual multifamily permitting of 6,499 units, more than doubling the market’s level from April 2019. New York and Austin had increases of more than 4,000 units from last year, while the remaining increases were around 1,500 units or less.

The remaining four markets saw mild declines in annual permitting, falling roughly 2% to 11%. In net units, Dallas and Washington, DC permitted about 1,500 fewer multifamily units than the preceding 12 months, while Seattle and Orlando’s annual rate was down about 500 units from the previous year.

Compared to last month, all but four of the top 10 markets had fewer annual multifamily permits than in March. The exceptions were Houston, Austin, Los Angeles, and Orlando, which saw increases averaging roughly 4%. Washington, DC and Seattle had the steepest decreases in annual multifamily permitting from the previous month, falling about 10%.

Other markets that saw significant year-over-year decreases in annual multifamily permitting in the year-ending April were Atlanta (-6,791), San Francisco (-3,439), Miami (-2,993), San Jose (-2,539), and Boston (-1,965). A few smaller markets saw permitting decline sharply too such as Milwaukee (-1,789), Baltimore (-1,641), and Kansas City (-1,370).

On the other side, non-top 10 markets that had significant increases in annual multifamily permitting include Fort Worth (+4,260), Salt Lake City (+3,720), Nashville (+2,270), and West Palm Beach (+2,115). The small market of Lakeland-Winter Haven, FL saw a jump in multifamily permitting of 1,680% from April 2019 as more than 2,100 units were permitted for the year.

The annual total of multifamily permits issued in the top 10 metros – 166,751 – was 9.7% greater than the 151,984 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 #41 ranked metros.

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. Much like the top 10 metro list, the top 10 permitting place list includes many of the same 10 cities or permit-issuing place as last month. The cities of Austin, Los Angeles, and Houston continued to lead the list, and returned in the same order. Seattle slipped two spots, moving New York’s Brooklyn borough and Houston’s Harris county unincorporated area up one spot each. The city of Chicago fell out of the top 10 allowing Nashville, Phoenix, and Charlotte to move up, while the city of Fort Worth moved into the #10 slot.