The latest numbers from Freddie Mac estimate a shortage of 3.8 million housing units as of Q4 2020. Freddie Mac says these units are needed not only to meet the demand from a growing number of households but also to maintain a target vacancy rate of 13%.
That number may be even worse, as the pandemic has shifted where people work and live. The shortage crisis may even be one reason why housing prices just won’t go down. Construction companies haven’t been able to build fast enough to meet demand.
Coupled with skyrocketing interest rates and labor shortages, it’s been a hectic year for real estate. But one area that could help close that gap is the multifamily market.
According to a report from research firm Construction Coverage, permits for multifamily homes have picked up recently, with a higher share of permits approved in urban areas. The number of units authorized has jumped in the past few years, reaching 689,500 in 2022, while at the same time, the number of authorized single-family units declined for the first time since 2011.
While multifamily homes only account for 28% of the housing stock nationally, that number could increase in the next few years. Thanks to several states ending single-family zoning laws, multifamily homes are becoming more popular.
Markets With the Most Construction in Coming Years
The increase in multifamily homes isn’t the same across the country. Some areas have more than others. The New York-Newark-Jersey City region, for example, leads with over 46,000 authorized units. It also has a strong share of multifamily units—around 79% of new units in the market authorized are multifamily homes, while they currently make up 57% of the current share of housing units.
Other areas that already have a large level of multifamily housing, such as Massachusetts and New Jersey, have seen an uptick in recent years. But there’s also been an unexpected rise in authorizations in areas that…