According to NAHB analysis of quarterly Census data, the count of multifamily, for-rent housing starts declined somewhat during the fourth quarter of 2023. For the quarter, 102,000 multifamily residences started construction. Of this total, 98,000 were built-for-rent.
The market share of rental units of multifamily construction starts fell back to a still elevated 96% for the fourth quarter as the already small condo market remained held back due to higher interest rates. 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.
For the fourth quarter, there were just 4,000 multifamily condo construction starts.
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 2023 data, the average square footage of multifamily construction starts was relatively unchanged at 1,050 square feet. The median declined came in at 1,022 square feet.
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Interesting findings! The slight decline in multifamily units built for rent suggests a potential shift in the rental market. This shift could impact construction loans by influencing the types of projects developers seek funding for. Lenders may need to adapt their loan offerings to accommodate changes in demand for rental properties versus other housing types, ensuring they support diverse construction projects effectively.