Multifamily Construction Shines Brighter in EHS Markets


While the question of when the first cases of the novel coronavirus to reach American soil occurred is contested, its rapid spread in the United States by the end of the first quarter of 2020 has been transformative. During this crisis, the nation’s health infrastructure has been in focus.

NAHB’s Home Building Geography Index (HBGI), in addition to covering the regional dimensions of the home building market, presents a new economic geography class based on local employment in the education and health services sector (EHS). The HBGI designates EHS-focused regional markets as the top quartile of counties based on this employment share (25.7 percent or above of total employment). These counties make up 23.2 percent of the U.S. population.

The below figure identifies the counties that were designated as EHS-concentrated markets.

On a four-quarter moving average, year-over-year basis, the growth rate of single-family construction in EHS counties as of March 2020 was 4.8%. Their share of total single-family construction was 12.4%.

EHS counties’ share of multifamily construction was 18.4% for the same period, outpacing single-family construction over the past year. Moreover, multifamily construction in EHS markets has expanded at nearly twice the growth rate than multifamily construction in non-EHS markets over the past year (17.4% and 10.8%, respectively). There are many possible reasons for this but include that many hospitals are in population-dense regions that are more likely to require apartments. Additionally, there are many young people graduating from institutions of higher education, particularly with graduate-level credentials in education and medical sciences. As student debt is ever-increasing, single-family home affordability among these has been challenged. Such individuals may consider rental housing for longer periods of time, until incomes increase or household-level demographic changes allow single-family residency. Multifamily construction finished slightly stronger at the end of the previous year than by the end of the first quarter of 2020, posting a growth rate of 22.4% in EHS counties.

The multifamily data, as evident in the above figure, indicate that the multifamily residential construction share of activity in EHS-concentrated markets (as proxied by permit issuances), had been declining since the beginning of 2016, but picked up towards the last quarter of 2019 and the first quarter of 2020. These results are consistent with single-family construction gravitating towards lower density markets in recent quarters, as explained in a prior analysis.

A forthcoming HBGI analysis will use the most recent quarter’s data to investigate construction activity and state-level virus intensity as of mid-April.

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