A new report from the National Multifamily Housing Council presents a mixed report on the state of multifamily construction in the U.S. On the one hand, fewer delays are being experienced on the projects that are underway. On the other hand, fewer projects are being undertaken, with 37% fewer starts between 2Q 2023 and 2Q 2024, according to the Census Bureau.
The NMHC’s just released quarterly survey of construction and development activity for 3Q 2024 was conducted from September 3-17 and received responses from 29 leading companies.
Of these, 52% reported construction delays during the quarter – a figure well below the 84% reported in December, the 81% reported in March, and the 70% reported in June. The worst affected regions were the Rockies, Texas, and the Southeast. Delays in permitting caused 87% of the holdups, and 80% were due to late starts.
For 92% of respondents, compared to 73% in 2Q 2024, economic uncertainty was the reason for the delayed starts – “the highest value recorded for any option in any quarter for this question since the survey’s inception,” the report stated. Of respondents, two-thirds cited economic feasibility as the cause – down from 77% the previous quarter. Half the respondents blamed permitting, entitlement, and professional services for the delays.
Complaints about the availability of construction financing fell for the third time to 42%. Staffing shortages and materials sourcing did not cause delays in starts. However, 10% of respondents said labor was less available and 28% said it was more available, while 21% experienced materials delays, especially for electrical switchgear. Increases in contractor defaults were also noted.
The time it took to receive a building permit within six months fell from the second to the third quarter. However, permit issuance took seven to eight months in 14% of cases and nine months or longer in 21% of cases – both increases from 2Q 2024.
In 55% of cases – down from 70% in the prior quarter – respondents noted added project requirements like offsite improvements and additional infrastructure.
More respondents – 86% — reported that deals were repriced in 3Q 2024 compared to the second quarter. Of these, 28% were repriced up and 59% repriced down. The average change either way was 4%. Fewer respondents – just 7% — reported that no deals were repriced.
Looking ahead to the next quarter, 68% of respondents expected market conditions to remain stable. However, 18% thought conditions would improve to make it easier to build, and 14% thought they would worsen. Longer term, more than three out of four expected conditions to improve over the next six-12 months. There was disagreement about whether construction costs would rise in the next year.
A large majority of respondents did not expect the availability of debt and equity financing to change soon, but most anticipated improvement in the medium to long term for equity financing (74%) and debt financing (67%).
“The September findings make it clear that while we are witnessing slow improvements, rental housing providers continue to face real challenges when it comes to the construction of new communities,” said NMHC President Sharon Wilson Géno. “Lawmakers should implement housing solutions that will work, including removing barriers to building and incentivizing needed construction, and reject regulatory proposals that will increase housing costs.”
Source: “Permitting and Economic Factors Continue to Impact Multifamily Project Timelines”
