Residential Permitting Pauses but Multifamily Starts Soar
Building permits for both multifamily and single-family construction stalled or declined slightly on an annualized basis from March to April as housing markets perhaps anticipate slowing sales with rising inflation and mortgage rates.
According to the U.S. Census Bureau, the annual pace of multifamily permitting was down just slightly (-0.6%) to 656,000 units from March’s revised rate of 660,000 units but single-family permitting slipped 4.6% to 1.110 million units. Together, total residential permitting declined 3.2% from March to April to 1.819 million units.
Compared to one year ago, the annual pace of multifamily permitting is up 16.3% while single-family annualized permitting is down 3.6%.
On the starts side, single-family construction also fell, dropping 7.3% from last month’s annualized pace to 1.100 million homes. However, multifamily starts shot up 16.8% from March’s rate to 612,000 units, the highest annual starts rate for multifamily since January 2020. Both single- and multifamily starts are up from one year ago, with a 3.7% increase for single-family and a whopping 42.3% for multifamily starts.
Both annualized multifamily building permits and starts have been trending upward since 2021, after a relatively flat trajectory historically. Annualized multifamily permitting averaged about 440,000 units between 2015 and the end of 2020, but has averaged 580,000 units annually since 2021. Along with increased household formation in recent years, the single-family market has had difficulty keeping up with supply as all associated housing development costs have been rising and multiple other factors have hampered home builders from meeting demand. Multifamily has been filling the housing gap.
Increasing costs and supply chain delays have slowed the completions rate as well, with single-family completions down 4.9% from March to 1.001 million homes and multifamily completions down 6.6% to 281,000 units. Both are down or flat from one year ago.
These same delays have swelled the number of units currently under construction with multifamily construction reaching 811,000 units, the highest total since 1974. At the same time, single-family units under construction (815,000 units) is the largest number since the housing bubble of 2006. Additionally, the number of units authorized but not yet started construction are also at record highs for both since at least 2006.
The annual rate for multifamily permitting was up in all of the nation’s four Census regions from April 2021, with the largest annual increase in the Midwest region (up 69.6% to 105,000 units). The Northeast region’s annualized rate increased 15.8% to 88,000 units. Meanwhile, the West region increased by 9.2% to 166,000 units, while the South increased by 8.4% to 298,000 units from last April. Compared to the previous month, permitting fell by 16.4% in the Northeast and 4.2% in the West but was up 6.7% in the South and 1.7% in the Midwest region.
Like permitting, multifamily starts were up across all regions during the past year, with a huge jump in the South (65.7% to 319,000 units) and in the Northeast (51.6% to 119,000 units). The Midwest region started 30.2% more than the previous year at 41,000 units, while the West region was up only 4.3% with 133,000 units started for the year. Compared to March’s pace, the South nearly doubled starts (up 96%), while the West was up 9.2%. The Northeast (-29.9%) and Midwest (-41.2%) were both down from last month’s annual pace.
At the metro level, all of the top 10 permitting markets returned to the April list from March, and only two changed places. New York is still the leader in multifamily permitting with 38,366 units, more than 3,700 units greater than last year. The potential expiration of the 421a tax incentive in New York may cause a spike in multifamily permitting in the next few months as a similar scenario occurred recently in Philadelphia.
Austin remained at the #2 spot in April with 23,711 units permitted, followed by Philadelphia in the #3 spot with a total of 22,204 units. Dallas returned in the #4 spot with 19,792 units permitted, about the same as last month’s annual figure.
Houston also retained its spot from March at #5 with 17,892 units permitted for the year, about 1,500 units more than last year but about 800 less than last month. Seattle and Denver switched places on the list at #6 and #7, with 17,610 and 15,757 units, respectively. Both were up significantly from last year but Denver permitted about 1,400 fewer units than last month’s annual total.
Phoenix remained at #8 with 15,577 multifamily units permitted, almost 2,600 more than last year but about 230 less than last month.
Last month’s #9 and #10 (Minneapolis-St. Paul and Orlando) returned in order with about 14,500 units permitted each but Orlando saw a surge in permitting compared to its annual total one year ago with a gain of 6,651 units. Minneapolis permitted about 2,000 more units than last year and both markets improved about 900 units from March’s total.
All of the top 10 multifamily permitting markets increased their annual totals from the year before and they were generally large increases, ranging from a low of 1,468 units in Houston to almost 11,200 additional units in Philadelphia. Six of the top 10 markets increased multifamily permitting by at least 3,700 units over last year’s pace.
Other markets outside of the top 10 that saw significant year-over-year increases in annual multifamily permitting in the year-ending April were Atlanta (+9,133 units), Miami (+4,157 units), Salt Lake City (+3,874 units), Indianapolis (+3,719 units), North Port-Sarasota-Bradenton, FL (+3,322 units), and Colorado Springs (+3,283 units).
Significant slowing in annual multifamily permitting occurred in Anaheim (-2,856 units), Washington, DC (-1,887 units), San Jose (-1,434 units), Lubbock, TX (-1,204 units), San Diego (-978 units) and Tampa (-954 units).
Only four of the top 10 markets had more annual multifamily permits than the previous month, with the aforementioned Minneapolis and Orlando’s monthly gain of about 900 units from March’s annual totals leading the pack. Austin had a 2.8% increase from last month or 655 units, while Seattle increased 2.3% from March, adding 417 units to annual permitting.
New York permitting was virtually unchanged from the March total, while Denver permitted 1,442 fewer units for the year than last month. The remaining top 10 markets slipped between 36 units (Dallas) to 794 units (Houston) from their previous annual totals.
The annual total of multifamily permits issued in the top 10 metros – 199,930 – was about 30% more than the 153,954 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 #33 ranked metros.
Below the metro level, all of last month’s top 10 permit-issuing places returned to this month’s list with the first three remaining 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 city of Philadelphia remained at the top of the list in April with an annual total of 18,731 units as the city’s tax abatement policy change caused a flood of permitting late in 2021.
The city of Austin returned as the #2 permit-issuing place, with 14,759 units, up about 1,200 units from last month. The city-county of Nashville-Davidson returned at #3 with 9,565 units permitted, about 1,200 less than last month. The cities of Los Angeles and Denver switched places at #4 and #5 with 8,619 units permitted in the City of Angels and 8,442 units permitted in the Mile High City.
Mecklenburg County (Charlotte) moved up two spots to #6 in April with 8,365 units permitted, an increase of 230 units from March. The city of Seattle remained at #7 this month, permitting 8,229 units for the year-ending April but the city’s annual total fell by more than 500 units.
The city of Houston slipped two spots to #8 with 7,662 units permitted, almost 1,400 units less than the previous total. Unincorporated Harris County (Houston) moved into the #9 spot with 7,275 units permitted and the city of Phoenix settled into the #10 spot, permitting 7,205 units for the year.