Multifamily Building Permits Retreat from Recent High

After reaching a four-year high in August, multifamily permit levels fell in September, according to U.S. Census figures.

Multifamily permits fell about 7.5% from August but remain up about 20.8% from a year ago. The seasonally adjusted annual rate (SAAR) for annual multifamily (of projects with five-plus units) starts fell by more than 28% from August and by 5.8% from September 2018.

The less volatile single-family industry saw starts and permits inch up. Single-family starts grew 4.3% year-over-year and 0.3% from August. Single-family permits rose 2.8% YOY and 0.8% from August. Total residential permits and starts retreated from August’s 12-year high, but still garnered more than 1.25 million units started and 1.39 million units permitted.

The volatile SAAR for multifamily permits has oscillated around an annual average of 430,000 units since 2015 but has swung as high as 590,000 and as low as 318,000. Multifamily starts plateaued similarly at an annual average of 370,000. (Multifamily permits include condominiums and other projects that are not reflected in the starts survey, thus starts tend to lag permits.)

Despite these annual and monthly variations, permit levels are in line with the long-term average going back to 1959. With the higher annual rates over the past few months, total residential permitting levels are averaging about 1.3 million units. Total residential starts averaged 1.2 million units in the last year, while single-family starts averaged 860,000 units. Multifamily completions were down 10.9% from August at 285,000 units, and were down 6.3% from September 2018.

Annual multifamily building permits were up in all regions, except the Midwest, which contracted 3.4% to 42,000 units. The large South region permitted almost 10% more multifamily units than the previous year at about 206,000 units. Both the smaller Northeast and West regions had double-digit increases, but a numerical increase of about 23,000 to 41,000 units, totaling 57,000 units and 154,000 units, respectively.

Countering their permitting trends, multifamily starts were down in the West (-15.3%) and Northeast (-42.5%) regions, but were up sharply in the South (+22.8%) and modestly in the Midwest (+6.3%). Regionally, multifamily completions were down in all but the West region, but are anticipated to grow.

Locally, all but one of last month’s top 10 permitting metros remained the same with a few others shifting. New York, Houston, and Dallas again took the top three spots, followed by a rearranged order of Seattle, Washington, DC, Los Angeles, Austin and Minneapolis-St. Paul. Orlando replaced Chicago at #9 while Atlanta remained in the #10 spot.

Half of the top 10 markets experienced increases in annual multifamily permitting from last year. Dallas, Seattle, Los Angeles, Austin and Atlanta saw declines in permitting of from -2.9% to -18.2%.

Other markets with at least 1,500 more multifamily permits issued than last year include Tampa-St. Petersburg, Salt Lake City, San Antonio, Philadelphia, Nashville, Richmond, Jacksonville and Reno. Slowing of at least 1,500 units occurred in Oakland, Raleigh/Durham and San Diego.

The annual total of multifamily permits issued in the top 10 metros – 158,347 – was 8.5% greater than the 145,875 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 #36 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, this list shows few changes from August. The city of Houston again led the nation for the year-ending September, with Unincorporated Harris County (Houston) returning to the #2 spot and city of Austin returned to #3. Charlotte’s Mecklenburg County and the district of Washington, DC round out the top five.

Of the top permit-issuing places, Charlotte, Chicago, San Francisco, Denver, San Antonio and Nashville did not make the top 10 list for permits by metro. Consistently placing in the top three for metro-level permitting, New York and Dallas had no permit issuing places in the top 10 as their apartment development pattern is spread out among suburbs.