The missing middle construction sector includes development of medium-density housing, including townhouses, duplexes and other small multifamily properties.
While townhouse construction has trended higher in recent quarters, the multifamily segment of the missing middle (apartments in 2 to 4 unit properties) has disappointed. For 2021, there were only 12,000 starts of such residences. This is flat from from 2020, during a period of time when most construction segments expanded.
For the third quarter of 2022, there were just 5,000 2 to 4 unit housing unit construction starts. If accurate after revisions, that would mark the best quarter for this market segment since the middle of 2008. However, the gain is small, so it is not statistically significant. Nonetheless, it does match a pickup in permits for 2 to 4 unit production registered earlier in 2022.
As a share of all multifamily production, 2 to 4 unit development is only 3.4% of the total. In contrast, from 2000 to 2010, such home construction made up a little less than 11% of total multifamily construction. Construction of the missing middle has clearly lagged during the post-Great Recession period and will continue to do so without zoning reform focused on light-touch density.