Maps: Surge in Multifamily Coming from Unexpected Places

The state of the U.S. housing market has been one of the defining economic stories of the past two and a half years. Since the beginning of the COVID-19 pandemic, housing has become more expensive for both buyers and renters. Despite recent price drops, both home prices and rental prices remain roughly 30% higher than before the pandemic.

Inadequate housing supply has been a key factor contributing to issues with housing affordability in the U.S. for years. Federal mortgage backer Freddie Mac estimates that the U.S. has a 3.8 million unit shortage of housing. But the pandemic only exacerbated the issue of supply. Housing inventory fell to record lows in 2020. The shift to working, schooling, and socializing from home increased preferences—and competition—for larger, single-family homes among both buyers and renters. In addition, ongoing supply chain challenges and labor shortages have made it difficult for builders to add new stock: building permits and housing starts rose significantly in 2021 and 2022, but completions failed to keep up. And now with higher interest rates, building permits have again declined back to 2019 levels.

Despite these challenges, one promising sign for housing supply is an uptick in planned multifamily home construction. Multifamily housing increases the density and availability of housing units in urban and suburban locations, and it is more efficient and cost-effective to develop than single-family stock. And with more people now returning to their offices, denser housing closer to work and social attractions is regaining its appeal.

For several years prior to the pandemic, the total number of new multifamily units authorized held steady, while multifamily units as a share of total new units experienced a slow decline. Both of these figures increased in 2019 but fell off again with the onset of the pandemic in 2020.

In 2021, however, the total number of multifamily units authorized jumped from 491,700 to 621,700, which brought the share of multifamily units authorized from 33.4% to 35.8%. The following year, in 2022, the authorization of multifamily units continued to climb, reaching 689,500. Simultaneously, the number of authorized single-family units experienced its first decline since 2011. This resulted in a notable shift, with multifamily buildings accounting for 41.4% of new housing, marking the highest level since 1985.

Multifamily housing plays a crucial role in bolstering housing availability in states with substantial urban populations. Nationally, approximately 28% of the current housing stock falls under the multifamily category, although this figure exhibits significant regional disparities. New York State leads the pack with the highest proportion of existing homes classified as multifamily, standing at 52.5%, followed by Massachusetts (43.1%), Rhode Island (38.6%), Hawaii (36.4%), and New Jersey (36.0%). Conversely, states in the South, Midwest, and Mountain West, which tend to be more rural, have traditionally allocated fewer resources to medium- and high-density housing. For instance, in West Virginia, Idaho, and Mississippi, less than 17% of the existing housing stock comprises multifamily units.

When considering new housing units authorized in 2022, a few notable trends emerge. To start, states with already substantial levels of multifamily housing, such as New York, Massachusetts, and New Jersey, saw a significant uptick in authorizations during this period. In these three states, the proportion of authorized multifamily units surpassed 60% of the total, with New York leading at nearly 74%. Furthermore, in all but nine states, the percentage of new housing units categorized as multifamily exceeded that of the existing housing stock.

Perhaps most interesting, there has been a compelling surge in multifamily home construction in unexpected regions. Areas in the Midwest and West, traditionally characterized by average or below-average concentrations of multifamily housing, have now ascended to the forefront in terms of the proportion of newly authorized multifamily units. This includes states like South Dakota, Washington, Minnesota, Nebraska, Colorado, and Montana, all of which now exceed the 50% mark.

Similar patterns emerge at the local level, where a blend of densely populated coastal cities and focal points in the Midwest and Western United States show the highest rates of multi-family development. There are a few exceptions in Florida, Texas, and Georgia, but generally, cities in the South report the lowest rates of new multi-family housing. This is likely attributed to lower demand and lower home prices compared to other regions of the country.

Below is a complete breakdown of new multifamily housing development across all major U.S. metropolitan areas and all 50 states. The analysis was conducted by researchers at Construction Coverage using data from the U.S. Census Bureau. Refer to the detailed methodology section for more information.

See the full report from Construction Coverage here.