Multifamily Starts Predicted to Drop 20% This Year

Article originally posted on Globe St. on February 29, 2024

Coming off an exorbitant year of multifamily development, National Association of Home Builders (NAHB) said this week that starts will drop by 20% this year, which should help to reduce inflation.

Multifamily starts totaled 472,000 units in 2023, down 14% compared to the previous year. NAHB expects 379,000 total this year.

There are approximately 1 million units currently under construction — near the highest level since 1973.

This new supply will chill the market before stabilizing in 2025 to 388,000, according to NAHB forecasts.

“Tight lending conditions and the and the high cost of development loans continue to hinder additional multifamily housing production” and that as new apartment units come online, rent growth will slow, helping to ease inflation, according to Danushka Nanayakkara-Skillington, NAHB’s assistant vice president for forecasting and analysis, speaking at a press conference held during the NAHB International Builders’ Show in Las Vegas,

Another hindrance is the shortage of skilled labor, according to NAHB, which said the industry is short more than 400,000 workers, and this challenge will grow worse as building rebounds.

Building material and product shortages have also been an issue for the industry, according to NAHB, which cited difficulty in getting appliances, windows and doors, HVAC equipment, plumbing fixtures and fittings and cabinets.