The nation’s housing crisis is something on everyone’s mind. Both policymakers and the real estate industry have announced initiatives recently to tackle the housing shortage. To get a better idea of which of the country’s most expensive housing markets were doing the best job of building housing we looked at three important metrics: the number of new apartments needed annually, total stock of apartment units, and apartment unit completions over the past 12 months as a percentage of total stock.
While the numbers are daunting, there has been some good news recently. In late June, new Census Bureau data showed that total housing starts unexpectedly surged nearly 22 percent in May, the fastest pace in more than a year. For multifamily properties with five or more units, construction starts increased by 28 percent. This comes after a record year in 2022 for multifamily development, when an estimated 420,000 new apartments were built in the U.S., the highest amount in 50 years. These latest figures are welcome news for the multifamily industry, especially amid a tough landscape for developers, where construction and materials costs have remained high.
The data also shows that the single-family housing market is incredibly tight, with the number of homes for sale in May dropping to the lowest level in more than a decade, according to Redfin. In the multifamily market, a new study from the National Multifamily Housing Council found that the U.S. needs to build 4.3 million more apartments by 2035 in order to meet the demand for rental housing.
In New York City, which typically falls somewhere in the top three of the nation’s most expensive housing markets, the amount of new apartment units needed annually is pegged at 10,000, according to data from the National Apartment Association (NAA) and the National Multifamily Housing Council (NAA). Over the past year, more than 20,000 units have been completed, double the identified need. And city officials are pushing for even more: earlier this year, NYC Mayor Eric Adams unveiled a plan to turn vacant office space in the city into 20,000 new apartments.
Other cities’ development numbers stood out as well. San Francisco, a city notorious for its sky-high rents and restrictive development laws, delivered more than 9,500 units over the past 12 months, or 2.1 percent of the city’s total apartment housing stock. For a city that needs 4,000 new apartments annually, that’s great news for renters. In Miami, where the office market has soared over the past few years as a number of high-profile companies have relocated or opened offices there, multifamily development has also been on a hot streak. The South Florida city posted the highest number of completed units over the past year as a percentage of total housing stock with 3.5 percent, or about 20,760 apartment units. Other cities with notable development figures include Seattle, with 3.2 percent of total apartment home stock and Boston, with 2.7 percent.
There’s still a long way to go in meeting the future demand for rental housing over the next ten plus years. With homeownership becoming further out of reach for many Americans due to a multitude of factors, including inflation, mortgage rates, stagnant wages, and crushing student loan debt, rentals will continue to be the only choice for a lot of would-be homebuyers. Between 2021 and 2022, the median home price increased more than 15 percent in the U.S., according to the St. Louis Federal Reserve. The multifamily industry has experienced some recent struggles with soaring insurance costs and declining property sales, but these will likely be temporary hurdles that aren’t totally unexpected during a downturn like the country is currently experiencing. Even in cities where construction costs are high and regulatory barriers are high, the huge demand for more rental housing will continue to drive development for many years to come.