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Cape Coral, FL – which is prone to natural disasters – is permitting more multifamily housing than any other place in the U.S. Austin is in second place, but is seeing a significant decline in permits.S

SEATTLE, July 9, 2024–(BUSINESS WIRE)–(NASDAQ: RDFN) —Builders in the U.S. have received permits to build 13 multifamily units per 10,000 residents so far this year, nearly 30% less than the average of 18 during the same 2021-2023 period, according to a new report from Redfin (redfin.com), the technology-based real estate brokerage.

The report is based on a Redfin analysis of U.S. Census Bureau data on multifamily building permits in buildings with five or more units during the first five months of 2024 and the same periods in 2021 through 2023. The national figures cover the entire U.S., while the metropolitan sections below cover the 79 U.S. metropolitan areas with at least 750,000 residents.

The number of building permits for multifamily housing has declined, not because they are harder to obtain, but because builders are applying for fewer permits. Here are two reasons why builders are applying for fewer permits:

  1. Due to increased interest rates, it has become more expensive to borrow money for construction projects.

  2. Due to the construction boom of recent years, near-record numbers of new multifamily homes are already coming onto the market, making it difficult for some property owners to find tenants. Less than half (47%) of new apartments completed at the end of last year were rented within three months – the lowest proportion since 2020.

While building permits and housing starts for multifamily housing have dropped significantly—both are below their historical 10-year averages—the number of completed units is still at an all-time high. That’s because many projects started during the pandemic are just now being completed. This backlog of new units means property owners in many areas are competing with each other for tenants, putting a cap on U.S. rent increases. Asking rents are up less than 1% year over year—a far cry from the 18% growth seen during the pandemic—though they’re still at their highest levels since 2022.

“Potential renters should be aware that now may be a better time to sign a lease than later,” said Sheharyar Bokhari, senior economist at Redfin. “Owners may start to raise rents again when all the new apartments that come on the market are occupied by tenants and supply is no longer as great, which could be in a year or two.”

Cape Coral and Austin approve more multifamily housing than any other place in the US

In Cape Coral, FL, builders received permits to build 27 multifamily units per 10,000 residents this year—the highest rate among the 79 major cities analyzed by Redfin. This was followed by Austin, TX (21), Greensboro, NC (20), North Port, FL (18), Omaha, NE (17), Nashville, TN (15), Tampa, FL (14), Orlando, FL (13), Dallas (13), and Columbus, OH (12).

Many of these metropolises are located in the Sun Belt, which gained popularity during the pandemic and sparked a construction boom in the region. Four of the ten metropolises mentioned above are in Florida.

Florida is at high risk from storms, flooding and sea level rise and is the epicenter of the home insurance crisis. But builders are continuing to build because demand is still there — in part due to the influx of out-of-towners who moved in during the pandemic. The number of building permits in Florida could also increase as homeowners continue to rebuild after Hurricane Ian in late 2022.

The two metropolitan areas with the fewest building permits for multi-family housing per 10,000 residents are in California. In Stockton, CA, no permits were issued in the first five months of the year. This is followed by Bakersfield, CA (0), Providence, RI (0), El Paso, TX (1), Baton Rouge, LA (1), Cleveland (1), Fresno, CA (1), Detroit (1), Dayton, OH (1) and New Orleans (1).

Multifamily construction has slowed in most areas since the pandemic, but there are 25 metropolitan areas where permit numbers have increased

Most metropolitan areas have seen a decline in multifamily building permits since the pandemic. The largest decline was seen in Austin, although the city still has the second-largest number of building permits in the country. As mentioned, builders in the Texas capital received 21 permits per 10,000 residents this year—but that’s down from an average of 40 in 2021-2023. Jacksonville saw the second-largest decline (5 permits per 10,000 residents in 2024 versus 23 permits per 10,000 residents in 2021-2023). Next were Colorado Springs, CO (7 versus 24), Boise, ID (4 versus 17), and Raleigh, NC (9 versus 21).

Many of the above real estate markets increased in popularity during the pandemic but have since weakened, partly because many people could no longer afford the properties.

At the other end of the spectrum, 25 metropolitan areas are issuing more building permits than they did during the pandemic. Builders in Greensboro received 20 multifamily building permits per 10,000 residents this year, up from an average of just four in 2021-2023 – the largest increase among the metropolitan areas analyzed by Redfin. Rounding out the top five are Cape Coral (27 vs. 16), Omaha (17 vs. 10), Columbus (12 vs. 7) and Tampa (14 vs. 9). Complete metropolitan-level data can be found in the report linked at the end of this press release.

In many metropolises where there was a construction boom during the pandemic, rents are falling

In 16 of the 33 metros for which Redfin has rental data, median asking rents have declined year over year. In many of these metros, rents are falling because multifamily construction has exploded, meaning building owners are competing for tenants. In the 16 metros where rents are falling, an average of 14 multifamily units per 10,000 residents were allowed in 2021-2023. By comparison, in the metros where rents are rising, an average of just seven units per 10,000 residents were allowed.

When looking at current rental price trends, it makes sense to analyze permits for the years 2021 to 2023 (and not 2024), as these are the units that have already entered the market and therefore have had time to impact rents.

In Jacksonville, the median asking rent fell 10% year over year in May — the largest decline among metros for which Redfin has rental data. Jacksonville was one of the largest leaseholders in the country in 2021-2023, averaging 23 multifamily units per 10,000 residents. It’s a similar story in Austin, which signed the most leases in the country during the pandemic, and saw a 7% decline in asking rents in May — the third-largest decline among metros for which Redfin has rental data.

For the full report with metro-level charts and data, visit: https://www.redfin.com/news/america-building-fewer-apartments-2024

About Redfin

Redfin (www.redfin.com) is a technology-based real estate company. We help people find homes by providing brokerage, rental, lending, title insurance and renovation services. We operate the nation’s leading real estate agent website. Our clients can save thousands in fees by working with a top agent. Our clients buying a home see homes first with on-demand showings, and our lending and title services help them close the purchase quickly. Clients selling a home can have our renovation team fix it up to sell for top dollar. Our rental business enables millions of people across the country to find apartments and homes to rent. Since our founding in 2006, we’ve saved our clients more than $1.6 billion in commissions. We serve more than 100 markets in the U.S. and Canada and employ over 4,000 people.

Redfin’s subsidiaries and affiliated brands include: Bay Equity Home Loans®, Rent.™, Apartment Guide®, Title Forward® and WalkScore®.

For more information or to contact a local Redfin real estate agent, visit www.redfin.com. For real estate market trends and data downloads, visit the Redfin Data Center. To be added to Redfin’s press mailing list, email [email protected]. Click here to view Redfin’s Press Center.

View original version on businesswire.com: https://www.businesswire.com/news/home/20240709995508/en/

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Redfin Journalism Services:
Kenneth Applewhiaite
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