Rental Apartment Construction Is At a 27-Year High

New figures offer the latest reminder of an apartment boom.

Housing starts fell in October because of a 15.5% drop in the multifamily sector, which is notoriously volatile. But the broader picture shows that apartments have been on a tear this year.

Construction of multifamily housing units—those with five units or more—is running at its strongest 12-month pace since 1989. Moreover, the share of those units being constructed as rentals is at its highest since record-keeping began in 1974. More than 93% of units in buildings with at least two units are being constructed as rentals.

Multifamily construction is now higher than it was during the peak in the previous housing cycle, reached in 2006. But back then, far more of these units were being built as condominiums, not as rentals.

This means that the number of rental units in multifamily buildings built over the last 12 months—around 330,000 units had begun construction as of October—is the highest since 1987.

Construction of single-family homes has been much weaker. Even though building permits for single-family homes hit their second highest level since the downturn in October, permits are running just 1% ahead of last year’s pace through October.

Source: The Wall Street Journal