Multifamily Construction Continues its Shift to the Suburbs

According to the latest release of the National Association of Home Builders’ (NAHB) Home Building Geography Index (HBGI), the trend of apartments and other multifamily residential construction continued to shift to suburban areas in Q3 2021. This continues a pattern that started in prior quarters.

According to the HBGI, between Q3 of 2020 and 2021 the share of new multifamily permits fell from 40.5% to 37.9% in large metro core markets. On the other hand, the permit share in small metro area counties increased from 24.9% to 27.2%.

The report notes that although these percentage changes seem relatively small, they are statistically significant changes. Historically, year-to-year changes in multifamily market share are usually slow to develop and rarely move more than one percentage point higher or lower. This makes these latest year-over-year numbers noteworthy. The market shares include small towns and rural areas, which make up less than 10 percent of all activity. However, as with the other lower density submarkets, their market shares have been rising since 2016.

The HBGI also notes that households opting to move into the higher density neighborhoods as the economy recovered from the pandemic was more evident in single-family home building than in its multifamily counterpart. Rising material costs owing to COVID-19-caused supply chain issues have propelled apartment and condo builders to move to lower-cost markets, which are often lower-density markets.


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Suburban Shift Continues for Multifamily