Charts: Smaller Multifamily Projects Gain Market Share in 2019

Originally published by: NAHBNovember 2, 2020

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Data from the 2019 Census Bureau Survey of Construction (SOC) show a gain for the number of multifamily units built in smaller properties, reversing a trend that favored larger buildings over recent years.

The SOC differentiates between a “building” and a “unit”, with “unit” defined as an apartment, a group of rooms, or a single room intended for occupancy as separate living quarters. The total number of multifamily units completed in 2019 was 352,000, with 321,000 units built-for-rent and 31,000 units built-for-sale (condo).

The number of multifamily units completed in buildings with 9 or fewer units and 10 to 29 units increased in both relative and absolute terms in 2019. In contrast, the number and percentage of multifamily units completed in buildings with 30-49 units or 50 or more units decreased. Development of smaller multifamily properties, such as duplexes, quadraplexes, and detached townhomes also reflect the burgeoning “light-touch” density housing market, which are also the “missing middle” market in America. Restrictive zoning laws that ban the missing middle may have an outsized impact on housing underproduction, according to a study by AEI.

Since the end of the Great Recession (2011), apartment development concentrated in larger properties.  Thus, the 2019 data show a slight reversal of this trend, which we forecast will continue in 2020 and 2021. For example, NAHB HBGI data of multifamily development shows construction growing faster in low-density markets, which would be consistent with an acceleration of the changed noted in 2019.

The SOC also provides a breakdown of multifamily unit and building completion by Census Regions. The biggest change from the previous year for buildings with 50 or more units occurred in the South, where the number of units constructed decreased from 93,000 to 72,000, a decline of 12%. Still, the South remained the largest builder of multifamily units in the 50 units or more category. This category also constituted 58% of all new multifamily units built.

Examining multifamily properties as structures paints a slightly different picture: the 2019 SOC data show little change in the shares of the 13,000 new multifamily buildings by building size. Furthermore, 10,000 of the new buildings were built for-rent. But the data do not definitively point to all newly constructed for-sale multifamily properties being smaller structures in general: in recent years, including 2019, the SOC data show the shares of new, multifamily for-sale units skew towards larger buildings whereas those of new, multifamily for-sale buildings skew towards smaller size.

The South and West Regions each had 4,000 new buildings. In the South, almost all the 4,000 new buildings built as multifamily residential structures were built-for-rent.