Atlanta Press Releases category interest

July 9, 2024 by Lily Katz and Sheharyar Bokhari

Builders obtained permits to construct 13 multifamily units per 10,000 people this year, down from an average of 18 in 2021-2023. They’ve pumped the brakes because borrowing costs are high and there’s already a near-record number of units hitting the market, which is limiting rent-price growth.

Landlords may feel empowered to jack up rents in the coming years once the slowdown in permitting trickles down to actual inventory.

Cape Coral, FL—at risk from natural disasters—is permitting more multifamily housing than anywhere else in the U.S. Austin ranks second, but has seen a significant slowdown in permits.

Rents are currently falling in many of the metros where multifamily construction boomed during the pandemic.

Builders obtained permits to construct 13 multifamily housing units for every 10,000 people in the U.S. so far this year, down from an average of 18 during the same periods in 2021-2023. That’s a drop of nearly 30%.

This is according to a Redfin analysis of U.S. Census Bureau data covering building permits for multifamily units in buildings with five or more units during the first five months of 2024, and the same periods in 2021-2023. A building permit is an approval given by a local jurisdiction to move forward with a construction project. Not all areas require permits. National figures in this report cover the entire U.S., while the metro sections below cover the 79 U.S. metros with populations of at least 750,000.

Multifamily building permits have dwindled not because they’re harder to get, but because builders are seeking fewer of them. Here are two reasons builders are seeking fewer permits:

Elevated interest rates have made it more expensive to borrow money for construction projects.

There’s already a near-record number of new multifamily units hitting the market due to a building boom in recent years, making it difficult for some property owners to find tenants. Less than half (47%) of new apartments that were completed at the end of last year were rented within three months—the lowest share since 2020.

While multifamily building permits and starts have slowed significantly—both have fallen below their 10-year historical average—the number of units being completed is still at historic highs. That’s because a lot of projects that started during the pandemic are just now being finished. This backlog of new units means property owners in many areas are competing with one another for tenants, which is putting a cap on how much U.S. rent prices can grow. Asking rents are up less than 1% from a year ago—a far cry from the 18% growth seen during the pandemic—though they are still at the highest level since 2022.

“Prospective renters should be aware that now may be a better time to sign a lease than later,” said Redfin Senior Economist Sheharyar Bokhari. “Property owners might start jacking up rents again once all of the new apartments hitting the market fill up with tenants and there’s no longer so much supply, which could be the case in a year or two.”

Cape Coral and Austin Are Permitting More Multifamily Housing Than Anywhere Else in the U.S.

In Cape Coral, FL builders got permits to construct 27 multifamily units per 10,000 people this year—the highest level among the 79 metros Redfin analyzed. Next came Austin, TX (21), Greensboro, NC (20), North Port, FL (18), Omaha, NE (17), Nashville, TN (15), Tampa, FL (14), Orlando, FL (13), Dallas (13) and Columbus, OH (12).

Many of these metros are in the Sun Belt, which surged in popularity during the pandemic, fueling a building boom in the region. Florida is home to four of the 10 aforementioned metros.

Florida faces high risk from storms, flooding and sea level rise, and is the epicenter of the housing insurance crisis. But builders keep building because there’s still demand—partly due to the influx of out-of-towners who moved in during the pandemic. Permits may also be rising in Florida as homeowners continue to rebuild after Hurricane Ian in late 2022.

The two metros with the fewest multifamily permits per 10,000 people are in California. In Stockton, CA, no permits were issued in the first five months of the year. It’s followed by Bakersfield, CA (0), Providence, RI (0), El Paso, TX (1), Baton Rouge, LA (1), Cleveland (1), Fresno, CA (1), Detroit (1), Dayton, OH (1) and New Orleans (1).

Multifamily Construction Has Slowed in Most Areas Since the Pandemic, But There Are 25 Metros Where Permitting Has Increased

Most metro areas have seen a dropoff in multifamily building permits since the pandemic, with Austin posting the biggest decline, despite still being the second largest permitter in the nation. As mentioned above, builders in the Texas capital obtained 21 permits per 10,000 people this year—but that’s down from an average of 40 in 2021-2023. Jacksonville saw the second biggest drop (5 permits per 10k people in 2024 vs 23 permits per 10k people in 2021-2023). Next came Colorado Springs, CO (7 vs 24), Boise, ID (4 vs 17) and Raleigh, NC (9 vs 21).

Many of the aforementioned housing markets rose in popularity during the pandemic and have since slowed, in part because many people have been priced out.

On the other end of the spectrum, 25 metros are permitting more than they were during the pandemic. Builders in Greensboro obtained 20 multifamily permits for every 10,000 people this year, up from an average of just four in 2021-2023—the biggest increase among the metros Redfin analyzed. Rounding out the top five are Cape Coral (27 vs 16), Omaha (17 vs 10), Columbus (12 vs 7) and Tampa (14 vs 9). Refer to the table at the bottom of this report for full metro-level data.

Rents Are Falling in Many of the Metros Where Building Boomed During the Pandemic

Median asking rents are down from a year ago in 16 of the 33 metros for which Redfin has rent-price data. In many of those metros, rents are falling because multifamily construction has ballooned, meaning building owners are competing for tenants. The 16 metros where rents are falling permitted an average of 14 multifamily units per 10,000 people in 2021-2023. By comparison, the metros where rents are rising permitted an average of just seven units per 10,000 people.

It makes sense to analyze permits in 2021-2023 (rather than 2024) when looking at current rent-price trends because those are the units that have already hit the market, meaning they have had time to impact rents.

In Jacksonville, the median asking rent fell 10% year over year in May—the biggest drop among the metros for which Redfin has rent data. Jacksonville was one of the country’s top permitters in 2021-2023, with an average of 23 multifamily units per 10,000 people. The story is similar in Austin, which was the nation’s top permitter during the pandemic and saw asking rents drop 7% in May—the third steepest decline among the metros for which Redfin has rent-price data.

​​Metro-Level Summary: 79 U.S. Metros With Populations of At Least 750,000

Figures are rounded to the nearest whole number.