Multifamily Built-for-Rent Share Remains Elevated


The market share of rental multifamily construction starts ticked back up to an elevated level of 95% in the fourth quarter of 2017, according to NAHB analysis of Census data. In contrast, the historical low share of 47% was set during the third quarter of 2005, during the condo building boom. The average share of 80% was recorded during the 1980-2002 period. There were only 20,000 multifamily condo units that started construction over the last year, 29% lower than the 28,000 recorded in 2016.


The elevated rental share is also holding typical apartment size below levels seen during the pre-recession period. However, as multifamily developers build more for-sale housing units in the years ahead, the average size of multifamily homes is likely to rise. The recent pattern of change in the size of new multifamily units stands in contrast to the post-recession increase in the size of typical new single-family homes. According to fourth quarter 2017 data, the average per unit square footage of multifamily housing construction starts was 1,169, off from the post-recession high set at the start of 2015 (1,247 square feet). The median was 1,110 square feet.


Because the quarterly data are volatile, it is worth examining the numbers on a one-year moving average basis. For the fourth quarter of 2017, the one-year moving average for the multifamily size was 1,155 square feet, while the median was 1,105. The current quarterly median and averages are 4% and 3% higher respectively than post-recession lows. Nonetheless, the typical size of newly built multifamily units remains below the averages/medians recorded during the pre-recession years, when the share of for-sale multifamily was considerably higher.

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