Multifamily Permits and Starts Jump in November

Despite the weakened economy and a resurgence in new COVID-19 cases, multifamily permitting and starts both experienced a significant jump in November.

According to the U.S. Census Bureau, multifamily permitting increased 22.8% from October’s annual rate to 441,000 units, while multifamily starts were up 8% over the same period to 352,000 units. This was the first time since July that U.S. residential building permits and housing starts for projects with five or more units saw significant upward movement on a seasonally adjusted annual basis.

Compared to last November, however, multifamily permitting was still down 17.4%, while multifamily starts were down 16%. Multifamily construction has been mostly trending downward since the beginning of the pandemic and, despite this recent uptick, should continue to decline as a share of total residential construction going forward, as the single-family market continues to rebound.

Meanwhile, the single-family market persists in pushing ahead amidst the pandemic with better than expected permitting and starts. Builders took out more than 1.14 million building permits for single-family homes in the year-ending November. While up only 1.3% from October, this pace was over 22% more than what was permitted one year ago. Additionally, this is the highest single-family permitting total since March 2007, when the market was in the waning days of the housing bubble.

Single-family starts followed the same pattern. While little changed from October at about 1.19 million units (0.4% growth), starts were up by more than 27% from the annual pace from one year ago. That start rate is also the highest since early 2007.

The annual rates for both multifamily and single-family completions declined both month-to-month and from last October going into the winter months. Multifamily completions declined 34.6% from October to 280,000 units, while single-family completions dipped just 0.6% for the month to 874,000 units. Both were down about 4% to 6% from November 2019.

With both single-family and multifamily permits increasing, total U.S. residential building permits were up 6.2% from October and up 8.5% from last November. Total residential starts were up only 1.2% for the month but were up 12.8% for the year. With the recent surge in single-family permitting and the smaller jump in multifamily permits, total residential permits was at 1.6 million units for the first time since January 2007.

Regionally, annual multifamily permitting was down across all four regions year-over-year, with declines exceeding 25% in the Northeast (down 34.8% to 68,000 units) and Midwest (down 28.9% to 60,000 units). The large South region experienced a decline in its annual permitting rate of 10.6% to 197,000 units, while the West declined 6.9% to 115,000 units. The monthly change in annual rates by region were up sharply, with increases of 16% to 32%.

Regional annual multifamily starts were down in two regions year-over-year. The South region experienced a strong decline of 35.6% from last November to 146,000 units started and the West region’s multifamily starts declined by 25.2% to 76,000 units. The Midwest region’s multifamily starts were up 2.7%, increasing to 57,000 units, while the small Northeast region more than doubled their annual multifamily starts rate to 74,000 units.

At the metro level, all the top 10 permitting markets in November returned to the list from October but several changed places. New York remained the top permitting metro in the nation with more than 35,000 units permitted but Austin surpassed Houston to the #2 spot with 20,273 multifamily units permitted. After Houston at #3, Phoenix returned in the #4 spot with 13,164 units, while Los Angeles, Minneapolis-St. Paul, and Nashville-Davidson each moved up one spot on the list as Seattle plunged to #8 from #5 in October.

Last month Dallas was the market moving down the list as it fell from #4 to #9, where it remained this month. Washington, DC remained in the #10 spot with 10,004 units permitted, a 26% decrease from last year’s annual rate.

The strongest increases in multifamily permitting among the top 10 – and the only top 10 markets with an increase – were in Austin (+6,224 units), Phoenix (+4,460 units), and Nashville (+3,765 units).

Other markets that saw significant year-over-year increases in annual multifamily permitting in the year-ending November were Columbus, OH (+1,783 units), Cape Coral-Fort Myers (+1,727 units), West Palm Beach (+1,419 units), Sacramento (+1,384 units), and Baltimore (+1,067 units).

Dallas’ decline in annual multifamily permitting was worst among all markets with a decrease of 8,072 units, but Washington, DC, Houston, Seattle and New York each declined by at least 3,000 units among the top 10.

Significant slowing in annual multifamily permitting also occurred in Fort Worth (-4,627 units), San Francisco (-3,983 units), Tampa (-3,467 units), Atlanta (-3,246 units), Orlando (-2,980 units), Charlotte (-2,945 units) and Portland, OR (-2,662 units).

The annual total of multifamily permits issued in the top 10 metros – 154,898 – was 5.4% less than the 163,787 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 #43 ranked metros.

All but three of the top 10 had fewer annual multifamily permits than the previous month, with Seattle experiencing an 11% drop from October’s annual rate, and the remainder declining by 9% or less. Austin’s annual multifamily permitting shot up 16% from last month, while Washington, DC and Nashville had modest increases of less than 2%.

There was very little change in the list of top 10 permit-issuing places from October, with all of the top 10 places returning and only a few changing places. 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, Nashville, and Los Angeles continued to lead the list, along with the borough of Brooklyn, with Nashville moving ahead of Los Angeles this month. However, the city of Austin had an increase in permitting of 2,086 units from October, while the cities of Houston, Phoenix, Seattle, and Harris County had decreases of more than 500 units.

Despite a decrease of only 22 units in annual multifamily permitting in the Phoenix metro from October’s rate, the city of Phoenix had a decrease of 577 units. Conversely, 74% of the increase in annual permitting in the Austin metro from October’s pace was in the city of Austin.