Multifamily Starts Jump, Permits Remain Elevated in May

Multifamily permitting activity remained elevated and construction starts jumped in the latest U.S. Census Bureau estimates for May.

The seasonally adjusted annual rate for multifamily permits totaled 442,000 units in May, up 4.2% from one year ago. Though that permit volume was down April’s 13-month high, it topped 12-month average of 423,000 units and marked the seventh consecutive month of annual permitting levels above 435,000 units.

As permit levels have remained elevated for some time, multifamily starts jumped a whopping 13.8%, as 436,000 units got underway in the past year. That was well above the 12-month average of 351,000 units and the highest annual rate since December 2016.

After slowly climbing up from the recession-induced nadir of less than 100,000 units, multifamily permitting has leveled off at an annual average rate of about 427,000 units, somewhat higher than the long-term average of around 390,000 units annually since 1959.

Single-family permitting totaled 817,000 units, a 3.3% decline from the 12-month rate ending May 2018. Single-family permitting activity has seen a slight pullback over the past six months.

Total residential permitting levels, however, are still averaging between 1.2 million and 1.3 million units, as they have since 1959. Single-family and total residential starts trend closely with permits, but with slightly elevated volatility due to the nature and composition of their sample methodologies. Total residential starts averaged 1.2 million units in the past 12 months, while single-family averaged 854,000 units.

Regionally, annual multifamily permitting increased in the South (39.3%) and West (13.7%) regions from May 2018’s level but fell in the Northeast (-49.3%) and Midwest (-34.1%). The volume of permits in the South and West (221,000 and 117,000, respectively) were their second-highest annual rates since December 2018 each. The Northeast (35,000 units) and Midwest (52,000 units) were both below their respective 12-month averages.

Just as with permits, multifamily starts were up in the South (50.5%) and West (27.0%) but down in the Northeast (-46.8%) and Midwest (-45.3%). Starts in May were the highest of the preceding 12-months for both the South (232,000) and West (140,000). Although down significantly from May 2018, multifamily starts in the Midwest (44,000) exceeded their 12-month average, while the Northeast’s 21,000 units started was about half their 12-month average.

Among local markets, all but one of last month’s top 10 permitting metros remained the same and a few changed places. The top three remained in the same order, with New York, Houston and Dallas leading the way. Seattle and Los Angeles switched positions at #4 and #5 while Washington, DC remained at #6. Austin moved up to #7 and last month’s #7 (Newark) fell out of the top 10, replaced by Minneapolis-St. Paul at #8. Atlanta and Orlando returned in their #9 and #10 positions again this month.

Only four of the top 10 markets experienced increases in annual multifamily permitting from last year as Houston, Minneapolis-St. Paul, Orlando and Washington, DC increased their multifamily permitting momentum. The remaining six top 10 markets saw declines in permitting of from -1.0% to -12.6%.

Houston permitted almost 14,000 more multifamily units than the preceding 12 months, and Minneapolis-St. Paul jumped almost 4,500 units. Washington, DC and Orlando increased their permitting totals by from 1,600 units to 1,900 units. The largest declines among the top 10 occurred in Seattle (-1,822 units) and Austin (-1,617 units).

Other markets with at least 1,500 more multifamily permits issued than last year include Baltimore, Kansas City, Newark, Miami, Cape Coral-Fort Myers and Tampa. Significant slowing of 2,000 or more units occurred in San Diego, Oakland, Denver, Fort Worth, Portland, Phoenix and Las Vegas.

The annual total of multifamily permits issued in the top 10 markets – 154,892 – was 11.5% greater than the 138,909 issued in the previous 12 months. The total number of permits issued in the top 10 markets was almost equal to the number of permits issued for those ranked #11 through #39.

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 market list, the top 10 permitting place list includes the same 10 cities or permit-issuing place as last month. The city of Houston and Unincorporated Harris County led the nation once again for the year-ending May. The city of Austin, Charlotte’s Mecklenburg County and the city of Washington round out the top five.

With their apartment development more concentrated locally, five of the top permit issuing places did not have their metro areas make the top 10 list for metros. Although they placed among the top three for market-level permits, New York and Dallas had no permit issuing places in the top 10 as their apartment development pattern is more spread out geographically.