Backlog of Units Permitted But Not Started Shows More Starts Will Eventually Arrive

As the number of multifamily starts has risen over the past few years, the number of units authorized but not yet started has climbed as well. Interestingly, the ratio of units not started compared to total multifamily units permitted (or authorized) has increased slightly in 2022. Historically, 21.1% of annualized multifamily permitting is delayed from starting but that ratio increased to 22.9% in 2022. Perhaps the cumulative effect of construction headwinds and financing delays are hindering the normal rate of multifamily development. Although there are concerns of overbuilding with the projected level of completions approaching 600,000 units in 2023 and another 500,000 in 2024, those numbers pale in comparison to historical peaks, according to data from the U.S Census Bureau. Multifamily permitting reached more than 1.2 million units in 1972 during the first wave of garden apartment development that spread across the U.S. Another peak of almost 720,000 units hit in 1985 with another wave of apartment development. In the first wave, the per capita amount of multifamily units was almost 6 units per 1,000 U.S. residents. In 1985, it was about 3 units per 1,000. The per capita rate for 2022’s level of multifamily permitting (a peak of 701,000 units in July 2022) is only 2 units per 1,000 residents.