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Analysis: How Reliable Are the Census Multifamily Starts?

Jay Parsons

The U.S. Census Bureau’s November data showed that multifamily construction starts had declined by 12% on a year-to-date basis compared to the same period of 2022. Given the talk of apartments and overall housing scarcity, this number, while not significant, could be considered manageable.

But Jay Parsons, RealPage’s senior vice president and chief economist, disagrees with the Census information, pointing out that the drop in construction starts is closer 40% nationally. Nor is the drop confined to one region.

“It’s a similar story across the country,” he told Connect CRE. “The slowing starts have less to do with fundamentals, and more to do with challenges in getting construction loans and finding equity partners.”

In a recent article, Parsons indicated several reasons for a more significant decline in apartment construction starts than reported by the Census Bureau.

Different data sources. While the Census Bureau tracks a small sample of permit-holders to determine if they’ve launched construction on projects, private-sector data providers (like RealPage and Yardi Matrix) track individual projects from planning to completion. These data providers report a sharp drop in construction starts.

Decline in demand for architects. In quoting information from the American Institute of Architects, Parsons said there have been 15 consecutive months of declined billings for multifamily. The also AIA noted that conditions at firms specializing in multifamily residential “remained extremely weak.”

Lack of construction financing. Parsons turned to the National Multifamily Housing Council and its surveys of apartment developers. The surveys report that 90% of projects were delayed in 2023 due to a lack of construction financing availability. Additionally, according to the Federal Reserve’s Senior Loan Officer Survey, “the vast majority of lenders have tightened lending standards for new construction,” Parsons noted.

Sidelined capital. Along with less available debt, those with equity to spare aren’t necessarily putting it into ground-up constructions. Parsons noted that falling asset values are attractive to investors, who can spend less money on an operating property than one that has yet to break ground. “Only certain types of deals are finding willing partners,” Parsons said.

What it all means. “Right now, there’s more supply than demand, due to the 50-year high in apartment construction,” Parsons explained. “That won’t start to wind down until early 2025.” But with starts dropping so quickly, Parsons said that the second half of 2025 will see less supply, which will continue into 2026. “That will allow the current wave of supply to lease up and occupancy rates to recover,” he said. That should also lead to a rebound in rent growth.

Even if somehow interest rates decline, Parsons said that a meaningful ramp-up in apartment supply isn’t likely to happen much before late 2025 and into 2026. “Even if rates come down, the drop will likely be fairly modest unless there’s a recession,” he said. “And that will create other challenges that could limit starts.”


Inside The Story

RealPage's Jay ParsonsRealPage

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