Dive Brief:
- October apartment construction reached the fastest annualized rate in nearly 30 years, but the number of those projects underway or authorized and not yet started is plateauing, according to a Bloomberg analysis of Commerce Department data.
- The number of permit applications for multifamily developments is still on the rise, but apartment construction has already reached 96% of its pre-recession peak.
- An abundance of new apartment stock could force rents lower but could also free up construction workers to start building single-family homes or other projects where skilled labor is in short supply.
Dive Insight:
The report's findings come as little surprise to major apartment owners and developers who, according to CoStar Group, are already ratcheting down the number of construction projects that will be ready for construction in upcoming quarters.
Those findings dovetail with data from the National Association of Home Builders, which found that builder confidence in the single-family market increased two points in November — the highest level since March and the Housing Market Index's second-highest level since July 2005. Single-family builders are likely gearing up for increased work ahead as the multifamily segment slows down.
Within the multifamily segment, workforce and affordable housing seems to be on the rise, particularly in New York City. Freddie Mac has already spent nearly twice what it did in 2016, funding $968.6 million in loans through Sep. 30.
More and more, affordable housing is baked into large, luxury rental projects as a condition of being able to bring pricier units online. Those developments, too, are sometimes a condition of massive mixed-use developments that are forecast to create higher densities and create traffic congestion.
In July, Facebook unveiled its plans for "Willow Campus," an expansion of its Menlo Park, CA, headquarters. The new addition is a mixed-use development that will offer housing, a grocery store, a pharmacy and other retail space, in addition to $6.3 million worth of affordable housing development. Facebook creator Mark Zuckerberg and his wife, Priscilla Chan, have made similar pledges to increase the development of affordable housing, including a $45 million investment in their philanthropy organization, the Chan Zuckerberg Initiative, to cut down on incarceration and improve affordable housing stock in U.S. cities.
