The Number of Multifamily Rentals Units Under Construction Grows, While Unit Size Hits Two-Decade Low

A closer look at the U.S. Census Bureau’s Quarterly Starts and Completions by Purpose and Design data, with further analysis provided by the National Association of Home Builders (NAHB), reveals that the market share of rental units of multifamily construction starts increased to 94.2% during Q4 2021. In comparison, the historical low was set during Q3 2005 at 47%, amidst the condo building boom. Between 1980 and 2002, the average share was 80%.

Condo multifamily production increased in 2021, totaling 26,000 units for the year. This marks a 44% gain from 2020, when the total was just 18,000 units.

According to Q4 2021 data, the average square footage of multifamily construction starts ticked up to 1,056 square feet. The median was just 1,014 square feet. The NAHB says that an elevated rental share of multifamily construction is holding typical apartment size below levels seen during the pre-Great Recession period.

In their analysis the NAHB notes in the report that because the quarterly data are volatile, it is worth examining the numbers on a one-year moving average basis and that trend is declining. For Q4 2021, the one-year moving average for multifamily size was 1,049 square feet, while the median was 1,004. These measures are at more than two-decade lows. However, our forecast is for size to stabilize as multifamily building moves further out from urban cores as renters seek larger, more affordable housing due to the virus crisis. Gains for condo construction could also lift multifamily unit size.