Investing.com -- Redfin (NASDAQ:RDFN), the technology-powered real estate brokerage, has reported a significant drop in permits for multifamily housing units in the U.S. over the past year. According to a recent analysis of U.S. Census Bureau data, developers obtained permits for 12.4 multifamily units per 10,000 people, a decrease of 27.1% from the pandemic building boom, and a 5.5% decline from the years before the pandemic.
The analysis focused on building permits for multifamily units in buildings with five or more units. During the pandemic, the rise of remote work led many Americans to relocate, causing a surge in rental demand. Builders responded by increasing construction, especially in high-demand Sun Belt metros such as Austin, TX and Tampa, FL. This resulted in a record number of new apartments completed in 2024. However, with rents now stabilizing and borrowing costs increasing, building has become less attractive.
Redfin Senior Economist Sheharyar Bokhari noted that new apartments are being rented at the slowest pace on record. He added that elevated interest rates have made many projects too expensive, causing builders to slow down. This slowdown could lead to fewer options for renters and a potential increase in rents in the next year.
Despite falling rents, Austin, TX continues to be a hotspot for developers. Over the past year, the city granted permits for 64.5 multifamily units per 10,000 people, the highest among the 78 U.S. metros Redfin analyzed with populations of at least 750,000. The top five metros also included Cape Coral, FL (59.6), North Port, FL (53.3), Raleigh, NC (41.1), and Orlando, FL (40.7).
On the other hand, Stockton, CA recorded zero new permits in the past year, the lowest of the metros analyzed. Following Stockton were Bakersfield, CA (0.8 units per 10,000 people), El Paso, TX (1.6), Providence, RI (1.6), and Baton Rouge, LA (1.9).
Since the pandemic, 63% of the analyzed metros have seen a decline in multifamily construction. Stockton experienced the largest drop, with permits per 10,000 people falling to zero from 5.7, a decrease of 100%. Other significant declines were seen in Colorado Springs, CO (-82%), Boise City, ID (-64%), Minneapolis (-62%), and Jacksonville, FL (-61%).
Conversely, Oklahoma City saw the biggest increase in permits, growing 193% from 1.7 units permitted per 10,000 people during the pandemic to 5.1 over the past year. However, this is still below the national average of 12.4 units. Pittsburgh (+184%), Hartford, CT (+102%), Baton Rouge, LA (+90%), and Milwaukee (+88%) also saw substantial permit growth.
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