Introduction to the Apartment Boom
The number of new apartments has reached a 50-year high, with almost 592,000 new apartments finished in 2024, according to a U.S. Census Bureau survey. This surge in apartment construction has its roots in 2021 and 2022, when interest rates were low and rent growth was high. However, the Trump administration’s tariffs and deportations of potential construction workers, plus higher interest rates, could be a wet blanket on the boom.
Historical Context
The current rate of apartment construction is the highest since the 1970s, when baby boomers sparked a construction surge as they moved out of their childhood homes. In 1974, there were 693,000 new apartments built, when the country had about half as many households. The increased supply of apartments has lowered rents and increased vacancy rates, making new development less profitable.
Construction Starts and Completions
Apartment starts were down 27% in 2024 compared with 2023, and down 37% from a recent peak of 531,000 in 2022, despite the historic rate of completions. Apartment starts were at their lowest ebb since 2013. The massive jump in apartment construction has its roots in 2021 and 2022, when interest rates were low and rent growth was high, said Rob Warnock, senior research associate for Apartment List, a company that posts rental listings online.
State-by-State Analysis
Some states are building apartments faster than others, according to a Stateline analysis. Though completions aren’t tracked by state, permits that lead to new apartments have been granted at high rates in recent years in South Dakota, Utah, Arizona, and Colorado. Rates are lowest in Mississippi, Wyoming, West Virginia, Rhode Island, Oklahoma, and Alaska.
By Tim Henderson, Stateline.org
More new apartments were built in 2024 than in any other year since 1974, but the Trump administration’s tariffs and deportations of potential construction workers, plus higher interest rates, could be a wet blanket on the boom.
Housing Shortage
Housing experts have long lamented that there aren’t enough apartments and single-family houses in the U.S. — at least not in places where people want to live and at prices they can afford. Estimates of the national housing shortage last year varied widely, from 1.5 million houses and apartments to 20.1 million; since then, another 1.6 million houses and apartments have been built. Most experts estimate a shortage of 1.5 million to 5.5 million, according to the Joint Center for Housing Studies of Harvard University.
Challenges Facing the Industry
The apartment building industry faces several challenges, including high interest rates, tariffs on construction materials, and labor shortages caused by dips in immigration. These challenges are expected to create headwinds for new construction. Armand Domalewski, co-founder of YIMBY Democrats for America, said overregulation is a barrier to housing construction in many areas.
Tariffs and Labor Shortages
Another impediment to apartment construction has been high interest rates, which make it harder to borrow money to build, said Danushka Nanayakkara-Skillington, an assistant vice president for forecasting and analysis at the National Association of Home Builders. She expects apartment building starts to slow until later this year. “We are going to be short of workers for a long time. That’s the way it is. And of course tariffs are going to have an impact,” Nanayakkara-Skillington said.
State Initiatives
Some states have taken initiatives to address the housing shortage. In South Dakota, the Republican-controlled legislature worked to prolong the building boom with grants and loans under the state’s Housing Infrastructure Financing Program. The program put $200 million of state and federal funding toward defraying the costs of development in new neighborhoods, such as roads, sewer lines, and streetlights.
California’s Efforts
In California, the 2021 HOME Act was meant to spur more affordable housing and ease labor shortages, but it’s faced local opposition in some areas. At the end of last year, Democratic Gov. Gavin Newsom signed several measures that aim to streamline regulations and crack down on local resistance to the 2021 law.
Conclusion
In conclusion, the number of new apartments has reached a 50-year high, but the industry faces several challenges, including high interest rates, tariffs, and labor shortages. States have taken initiatives to address the housing shortage, but more needs to be done to ensure that there is enough affordable housing to meet the demand.
FAQs
Q: What is the current state of apartment construction in the US?
A: The number of new apartments has reached a 50-year high, with almost 592,000 new apartments finished in 2024.
Q: What are the challenges facing the apartment building industry?
A: The industry faces challenges such as high interest rates, tariffs on construction materials, and labor shortages caused by dips in immigration.
Q: What initiatives have states taken to address the housing shortage?
A: Some states, such as South Dakota and California, have taken initiatives such as grants and loans to prolong the building boom and streamline regulations.
Q: What is the estimated national housing shortage?
A: Most experts estimate a shortage of 1.5 million to 5.5 million houses and apartments.
Q: How have apartment starts and completions changed in recent years?
A: Apartment starts were down 27% in 2024 compared with 2023, and down 37% from a recent peak of 531,000 in 2022, despite the historic rate of completions.
