As the nation’s economy continues to improve, the number of Americans forming households in the U.S. has recovered to a more normal pace. Ironically, the multifamily engine that helped sustain the housing market under bleaker economic conditions has been sputtering a bit as things have gotten better.
That assessment comes from The State of the Nation’s Housing 2019, the annual tracking of the nation’s housing pulse conducted by the Harvard Joint Center for Housing Studies. As has been the case in past reports, this year’s survey found persistent disparities in supply and demand, especially in affordable housing stock. Home values varied widely, too: they were more than five times greater than incomes in roughly one in seven metro areas (primarily on the West Coast), compared with less than three times in about one in three metros (primarily in the Midwest and South).
On the renter side (which is predominantly multifamily), households fell for the second consecutive year in 2018, a stark contrast to the increases of the 12 preceding years. Despite that decline, rents are rising at twice the rate of overall inflation.
“The growing presence of higher-income renters has helped keep rental markets stable,” says Daniel McCue, a senior research associate at the Joint Center. “This has maintained demand for new apartments, even as overall rental demand has waned.” At the lower end of the market, the number of units renting for under $800 per month fell by one million in 2017, bringing the total loss from 2011–2017 to four million.
Looking forward, the report authors expect rental growth to be solid, with 400,000 additional renter households per year expected between 2018 and 2028. Whether these projections come to pass depends on a number of factors, including economic conditions, housing affordability, and the pace of foreign immigration.
Multifamily construction starts last year picked up after two years of decline, rising 5.6% to 374,100 units. With the exceptions of 2015 and 2016, multifamily construction was higher in 2018 than in any other year since 1988. However, given the previous two-year dip in starts and the lengthy construction process for larger apartment buildings, the number of multifamily completions fell 3.6% last year, to 344,700 units, the first annual decline since 2012.