The multifamily housing sector experienced regulatory and supply-side challenges, slow rent growth, and increased vacancy, positioning it for a weakened 2021. But the National Association of Home Builders says the market will stabilize in 2022. A recent NAHB analysis found 34% of multifamily construction in 2020 happened in lower density and lower cost markets. Multifamily construction starts are expected to fall further in 2021 by 11%. Still holding up better than nonresidential construction, multifamily may not see any growth until 2022, when NAHB forecasts a 5% increase in total units built.
Turning to the forecast, multifamily starts are expected to fall 11% this year to 349,000 units from a projected total of 392,000 in 2020. The downturn will be short-lived, as multifamily production is expected to post modest gains in 2022, up 5% to 365,000 units.
After four years of a steady, upward trajectory, rent growth flattened in 2020. “Due in part to pandemic-related issues, rent growth in December 2020 was up just 0.4% from a year ago,” said Danushka Nanayakkara-Skillington, NAHB’s Assistant Vice President of Forecasting and Analysis.