Multifamily permit volumes declined by double digits in August, while single-family permitting is on the rise.
Building permits for multifamily construction fell to 381,000 units on a seasonally adjusted annual rate in August, down 17.4% from July and 28.5% below the rate from last August. Current rates are well below recent averages. After climbing steadily since the Great Recession, annual permit levels for multifamily development plateaued around the middle of 2016 and have oscillated around a mean of about 440,000 units per year. Just in the past 12 months, annual multifamily permitting has averaged 449,000 units, but that average falls to 406,000 units going back seven months to January, the last time the rate for permits exceeded 500,000 units.
Likewise, multifamily starts fell to 375,000 units, 25.4% fewer than the previous month and 16.9% less than the rate from August 2019.
Conversely, the single-family market has recovered quickly from the COVID-19 pandemic-induced shutdown with permits climbing 6% from July and 15.6% from last year. Single-family starts are also up sharply – by 4.1% from last month and 12.1% from last August. Both permits and starts for single-family homes topped the one million mark in August for the first time since before the pandemic. The single-family market is still benefitting from historically low mortgage rates, increased personal savings, and greater interest in suburban living.
With single-family increasing and multifamily decreasing, total U.S. residential building permits were essentially unchanged from July (-0.9%) and last August (-0.1%). Total residential starts fell 5.1% for the month but were up 2.8% for the year. Total starts and permits have both exceeded 1.4 million units for the second consecutive month, after falling below that level in the aftermath of the pandemic.
Multifamily completions fell 15.4% from July to 312,000 units but are not far below the 12-month average of 332,00 units. Single-family completions, however, were down only 4.4% from July’s rate, to 912,000 single-unit homes. Both were down from their annual rates from one year ago as well.
Regionally, annual multifamily permitting was down in all regions, with the steepest declines in the Northeast (down 50.5% to 48,000 units) and Midwest (down 44.1% to 38,000 units). The South region permitted 186,000 units, 26.1% fewer than last August, while the West region permitted 110,000 multifamily units, 6.6% less than the preceding 12 months. The monthly change in annual rates by region were down in all but the South region, which saw a mild 2.2 increase from July’s pace.
Although national multifamily starts were down, only two regions saw sharp declines in their annual rates, as weather challenges in the Northeast (down 73.8% to 27,000 units) and South (down 30.1% to 156,000 units) hindered new development. Experiencing solid gains, however, were the Midwest (up 81% to 100,000 units) and West (up 32.9% to 92,000 units) regions. Compared to July, the decreases in the Northeast and South regions were more pronounced, with the South’s rate declining by a significant 132,000 units.
At the metro level, nine of the top 10 permitting markets in August returned to the list from July, with New York, Houston, and Austin again claiming the first three spots. New York’s multifamily permitting increased by more than 15% from last year to lead the nation, with more than 37,700 units, while Houston’s annual permit level remained about the same as last August with 21,230 units, only eight less than the year before. Austin permitting was up almost 35% to 16,783 units.
Los Angeles and Dallas switched places, as LA’s permit total increased by about 15% while the Dallas pace declined by almost 17% for the year. Both registered permits close to 14,000 units as of August 2020. Phoenix, Seattle, and Minneapolis remained in the same positions as last month with about 11,000 to 13,000 multifamily units permitted each. Of the three, Phoenix saw the biggest jump in permitting from last August, increasing 73% with permits for 5,700 additional units.
Orlando replaced Washington, DC in the top 10 list, increasing permitting 23% from last year with 11,119 total units, while the nation’s capital saw about 4,400 fewer units permitted, dropping 29% from last year and out of the top 10. Nashville again ranked #10 with 10,786 multifamily units permitted, an increase of 38% or almost 3,000 units from last August.
The strongest increases in multifamily permitting among the top 10 were seen in Phoenix (+5,714 units), New York (+4,945 units), Austin (+4,324 units), Nashville (+2,971 units) and Orlando (+2,109 units).
Other markets that saw significant year-over-year increases in annual multifamily permitting in the year-ending August were Cape Coral-Fort Myers (+2,206), Sacramento (+2,073), Newark (+1,911), Anaheim (+1,864), and West Palm Beach (+1,864).
Aside from the tiny eight-unit decline in Houston, two of the top 10 markets experienced significant decreases in annual multifamily permitting from last year, with a decline of 2,774 units in Dallas and 691 units in Seattle.
In addition to the 4,379-unit decline in Washington, DC, significant decreases in annual multifamily permitting occurred in Atlanta (-4,817), San Francisco (-3,543), Jacksonville, FL (-2,479), Chicago (-2,461), Charlotte (-2,290), and Philadelphia (-2,251).
Four of the top 10 had fewer annual multifamily permits than the previous month, with New York, Austin, and Minneapolis each decreasing an average of about 5% while Dallas fell 14.6% from July’s annual total. The remaining seven markets had increases in their annual permitting from last month ranging from 0.8% (Seattle) to 10.9% (Orlando), averaging 3.5%.
The annual total of multifamily permits issued in the top 10 metros – 163,692 units – was 13.1% greater than the 144,677 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 #42 ranked metros.
There was no change in the list of top 10 permit-issuing places from July, with all the same names returning 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 cities of Austin, Houston, and Los Angeles continued to lead the list with more than 10,000 units apiece. Nashville and the borough of Brooklyn permitted around 8,000 multifamily units each, while Houston’s Unincorporated Harris County recorded almost 7,000 units permitted.
Compared to last month, only four of the top 10 permitting places had fewer units permitted for the year – the cities of Los Angeles, Seattle, and Phoenix, and the borough of Brooklyn. Nashville-Davidson had the largest increase in annual multifamily permits from July to August with a 299-unit increase.