Rents Expected to Rise as Multifamily Construction Slows
Introduction
The slowdown in multifamily construction is expected to lead to a rise in rents, according to a new report from the National Apartment Association (NAA). The report found that the number of new multifamily units completed in the United States fell by 10% in 2022, the largest decline since the Great Recession. This decline is expected to continue in 2023, with the number of new units completed projected to fall by another 5%.The slowdown in multifamily construction is being caused by a number of factors, including rising interest rates, supply chain disruptions, and labor shortages.
The rising cost of construction is making it more difficult for developers to build new apartments, and the supply chain disruptions are making it difficult to get the materials needed to build apartments. Additionally, the labor shortage is making it difficult to find the workers needed to build apartments.
Impact on Rents
The slowdown in multifamily construction is expected to have a significant impact on rents. The NAA report predicts that rents will rise by 5% in 2023, and by another 4% in 2024. This will be the largest increase in rents since the early 1980s.The increase in rents is expected to be felt most acutely in large metropolitan areas, where demand for housing is high and supply is limited.
In some cities, rents are already rising at a double-digit pace. For example, rents in San Francisco rose by 12% in 2022, and they are projected to rise by another 10% in 2023.
