Five-year Multifamily Construction Boom Pours 1.8 million Units Onto the US Market

Over the past five years, the national multifamily housing market added a massive amount of new supply, with total completions surging from 1.3 million to 1.8 million units.

This 500,000-unit increase is 37% more than the number of rental units added in the previous five-year period. However, the pace and distribution of this supply growth varied markedly by region, with the Sun Belt dominating the expansion.

This region alone accounted for 67% — or 335,000 units — of the overall increase over the past five years, reflecting its continued appeal and robust demand. The Sun Belt accounts for eight of the 10 markets with the largest absolute increase in units added from 2020 to 2024. Among these, Austin, Texas, tops the list with an increase of 45,000 more units added compared to 2015-2019. Phoenix follows closely behind, registering a surge of 40,000 more units added in the past five years compared to 2015-2019, more than doubling its previous development volume for a remarkable 109% increase.

While much of developers’ attention has centered on Sun Belt markets, two northern cities, Minneapolis and Philadelphia, emerged as unexpected entrants among the top apartment supply-adding markets.

Minneapolis experienced an increase of nearly 30,000 more units added from 2020 to 2024 compared to 2015 to 2019. Philadelphia added 48,000 more units from 2020 to 2024, up from 28,000 units added in the previous five-year period. Notably, these two markets have maintained more balanced conditions than many of their Sun Belt counterparts. Minneapolis, for example, ended the third quarter of 2024 with an apartment vacancy rate of 7.4%, up 230 basis points from 2019 but still below the national average of 7.9%. In contrast, Austin saw its apartment vacancy balloon by 710 basis points, reaching 15.3%.

However, not all markets experienced a surge in new apartment units over the past five years. Multifamily developers pulled back in Orange County and San Jose as both California markets posted declines in the number of new units added from 2020 to 2024 compared with the previous five-year period.

Orange County added 7,500 fewer new units during that period, while the number of new units added in the past five years in San Jose dropped by 4,000. Seattle’s multifamily development market also remained relatively stable. The number of new units added from 2015 to 2019 totaled 54,000 units, declining by just 1,000 units in the most recent five-year span. Despite a drop in absorption, Seattle’s overall market pain has been minimal, with a modest 100-basis-point increase in the vacancy rate, ending the third quarter of 2024 at 7.1%. The Seattle multifamily market remains well-positioned for increasing demand moving into 2025.

In terms of the absolute number of new apartment units added over the past five years, Dallas-Fort Worth leads the pack with 151,000 units added. New York followed with 120,000 units added, and Houston secured the third spot with 106,000 units added.

Article courtesy of CoStar.