Sep 7, 2023 - Economy

Apartment building construction on track to hit record high

Metro areas with the most new apartment units to be constructed in 2023
Data: RentCafe; Note: Includes buildings with 50 or more units; New York metro numbers do not include the Bronx or Staten Island; Table: Kavya Beheraj/Axios

New apartment construction is on track to top a 50-year high, with nearly 461,000 units expected to be built across the U.S. this year, according to a new report.

Why it matters: A housing shortage in the U.S. has contributed to the rising cost of both renting and buying.

What's happening: A surge in new apartment supply — 1.2 million units were completed during the pandemic — helped slow rent growth nationwide, but some parts of the country saw more housing being built than others.

  • The bulk of those new apartments are located in 20 metro areas where roughly 41% of U.S. renters live, per the report by RentCafe, which analyzed data from real estate intelligence service Yardi Matrix.

The big picture: Many first-time buyers feel priced out of the brutal housing market.

  • Nearly three-fourths of renters say they're renting in an area where they couldn't afford to buy, according to a new survey from RealPage, a real estate analytics and software company.

Yes, but: Around 89% of the units completed from 2020 through 2022 are high-end, per the report — not the type of affordable apartments many renters want.

What they're saying: Steep mortgage rates and homeowners association fees have kept Jessica Thomas stuck renting in Denver, where she's been looking to buy for the last two years.

  • "I thought I'd be in my own home by now," Thomas tells Axios.

Reality check: Affordability isn't the only reason people rent. Thomas, who lives alone, says she likes that maintenance is someone else's responsibility.

  • "Many renters will eventually buy homes. But in their current life stage, most renters are content to be renters" and enjoy the flexibility that comes with renting, RealPage chief economist Jay Parsons writes on LinkedIn.
Data: RentCafe; Note: Includes buildings with 50 or more units; Chart: Axios Visuals; Chart: Axios Visuals

Between the lines: Homebuilding has picked up in recent months, with July single-family housing starts jumping 6.7% above June, the latest U.S. Census Bureau data shows.

What's next: 1 million rental units are slated for completion through 2025, but higher costs and other headwinds could slow developers' breakneck pace in future years.

  • "Tightening of bank lending standards — combined with rising costs of construction materials, labor and land — has made new projects harder to pencil," senior analyst Doug Ressler at Yardi Matrix says in the RentCafe report.
Go deeper