Nearly 1 million apartments are currently under construction in the US, the highest number since 1974.
The 943,000 units underway a 24.9% increase compared to a year ago, a level that the National Association of Home Builders (NAHB) said this week is not sustainable.
The group predicted the level to fall by 28% this year to 391,000 and will stabilize in 2024 at about 374,000 starts.
The sector this year faces headwinds after a seemingly unstoppable performance run in recent years.
“Slowing rent growth, rising unemployment, tightening commercial real estate financing conditions, and a substantial amount of supply in the construction pipeline have caused a large backlog of multifamily developments,” NAHB assistant vice president for forecasting and analysis, Danushka Nanayakkara-Skillington, said in prepared remarks.
Nanayakkara-Skillington noted that regulations also figure to greatly affect multifamily development costs, referencing research conducted by NAHB and the National Multifamily Housing Council.
“Apartment and condo developments can be subject to a significant array of government regulations including zoning requirements, building codes, impact fees, permitting requirements, design standards, and public land requirements, among others,” she said.
The persistent lack of skilled labor for nearly all aspects of construction is another challenge for 2023 and building material and product shortages have also been an issue.
Markets with the most permits include the New York-Newark-Jersey City region; Atlanta-Sandy Springs-Roswell, Ga.; Dallas-Fort Worth-Arlington; Houston-The Woodlands-Sugarland, Texas; Los Angeles-Long Beach-Anaheim, Calif; Washington-Arlington-Alexandria, D.C.-Va.-Md.-W.Va.; Phoenix-Mesa-Scottsdale, Ariz.; and Minneapolis-St. Paul-Bloomington, Minn.-Wisc.