Multifamily Unit Size Trends Lower

According to NAHB analysis of quarterly Census data, the market share of rental units of multifamily construction starts increased to 94.2% during the fourth quarter of 2021.  In contrast, the historical low share of 47% was set during the third quarter of 2005, during the condo building boom. An average share of 80% was registered during the 1980-2002 period.

Condo multifamily production increased in 2021, totaling 26,000 units for the year. This marks a 44% gain from 2020, when the total was just 18,000.

An elevated rental share of multifamily construction is holding typical apartment size below levels seen during the pre-Great Recession period. According to fourth quarter 2021 data, the average square footage of multifamily construction starts ticked up to 1,056. The median was just 1,014 square feet.

Because the quarterly data are volatile, it is worth examining the numbers on a one-year moving average basis and that trend is declining. For the fourth quarter of 2021, the one-year moving average for multifamily size was 1,049 square feet, while the median was 1,004. These measures are at more than two-decade lows. However, our forecast is for size to stabilize as multifamily building moves further out from urban cores as renters seek larger, more affordable housing due to the virus crisis.  Gains for condo construction could also lift multifamily unit size.

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