Multifamily Permitting Hits 13-Month High in April

April saw multifamily permitting at a 13-month high as starts increased, indicating this high-development cycle is still going strong.

Multifamily permitting on a seasonally adjusted annual basis totaled 467,000 units in April, according to the latest U.S. Census figures. That’s the highest total since March 2018 and well above the average of 421,750 units seen over the past 12 months.

Meanwhile, multifamily starts hit 359,000 units, also above its 12-month average.

Both series were about 1.5% greater than their annual totals in April 2018.

Since January 2015, multifamily permitting has leveled off around an annual average rate of 427,000 units, greater than the long-term average of around 390,000 units annually since 1959.

Meanwhile, single-family permitting fell to 782,000 units in the year-ending April 2019, the lowest annual seasonally adjusted rate since October 2016 and the first reading below 800,000 units since May 2017. Since the Great Recession, single-family permitting had been steadily increasing from less than 400,000 units to almost 900,000 in early 2018 before tapering to its current level below 800,000 homes.

However, the total residential permitting level has averaged between 1.2 million and 1.4 million units since 1959, closer to 1.2 million in recent years. The long-term average for single-family permitting is close to 900,000 units, thus, the shortfall in single-family permits appears to be offset by an increase in residential units devoted to multifamily. The long-term ratio of multifamily to total residential permits is less than 29%, but that increased to average about 33% since the housing bubble burst and reached 36% in April 2019.

Regionally, annual multifamily permitting increased in three of the four U.S. regions, with little change in the Midwest (+0.8%), a moderate bump in the West (+5.9%) and a solid jump in the Northeast (+75.6%). The South saw multifamily permitting dip 11.1%, to 211,000 units for the year-ending April 2019.

Annual multifamily permitting through April exceeded the preceding 12-month averages in all four regions.

A wet spring has slowed annual multifamily starts in several regions, but the small Northeast and Midwest regions have rebounded to post annual increases of 103% and 22%, respectively. The South and West regions experienced declines in multifamily starts of 7% and 24%, respectively, yet they each averaged more than 100,000 units started between them.

At the metro level, all of last month’s top 10 permitting metros remained the same, but several jockeyed for positions. Houston moved up one spot to #2, displacing Dallas to #3. Along with New York, the top two permitted at least 20,000 multifamily units for the year-ending April 2019 and Dallas was close with 18,502 units.

Newark and Washington, DC switched places again at #6 and #7, while Atlanta and Orlando switched spots at #s 9 and 10. Los Angeles, Seattle and Austin remained in their top 10 spots from last month.

All but three of the top 10 markets experienced increases in annual multifamily permitting from last year as Dallas, Seattle and Newark each saw permitting slow by about 9% to 15%, or about 1,800 units to 2,300 units each. New York, Atlanta and Orlando had significant double-digit increases from last year, while Los Angeles, Washington, DC and Austin had modest increases.

Houston’s recovery from its recent slowdown continues with April’s annual multifamily permitting tripling the year-ago pace. The metro is still rebounding from the severe cutback in multifamily permitting caused by their energy-related economic slowdown, as well as elevated post-recession construction levels.

Other markets with at least 1,000 more multifamily permits issued than last year include Minneapolis-St. Paul, Miami, Cape Coral-Fort Myers, Baltimore and Kansas City. Significant slowing of 2,000 of more units occurred in Portland, Fort Worth, San Diego, Phoenix, Denver, Oakland, Detroit and Boston.

The annual total of multifamily permits issued in the top 10 metros – 150,844 – was 14.4% greater than the 131,895 issued in the previous 12 months. The total number of permits issued in the top 10 metros was almost equal to the number of permits issued for the #11 through #39 ranked metros.

The list of top individual permitting places – cities, towns, boroughs and unincorporated counties – generally include the principal city of some of the most active metro areas. The city of Houston led the nation for the year-ending April, followed by Unincorporated Harris County. The city of Austin, Charlotte’s Mecklenburg County, and the city of Chicago round out the top five.

Suburban apartment development continues to be evident in the placement of three county-level permitting places among the top 10, although Nashville-Davidson County displaced Unincorporated Osceola County (Orlando) at the #10 spot. Despite placing in the top three for metro-level permits, New York and Dallas had no permit issuing places in the top 10 as their development pattern is more dispersed geographically.