Multifamily Starts Surge 5% YOY: Apartment Developers Secure Permits for 444,000 Units in Buildings with 5+ Units Despite Challenges in Equity Market

According to a monthly report from HUD and the U.S. Census Bureau, housing starts for buildings with five or more units fell 30.4% month over month in May, but rose 5% year over year to a seasonally adjusted rate of 316,000. The overall housing starts came in at a seasonally adjusted annual rate of 1.3 million in May, a 4.6% decrease year over year and a 9.8% drop compared to April.

Despite the overall decline in housing starts, the multifamily market remains strong. At the end of May, 733,000 units were under construction, a 18.9% year-over-year drop and a 1.5% month-over-month decline. Multifamily developers finished an annualized 487,000 apartments in buildings with five or more units, a 6.7% year-over-year decline and a 0.2% month-over-month increase.

Apartment developers pulled permits for a seasonally adjusted rate of 444,000 apartments in buildings with five units or more, a 13% year-over-year increase and a 1.4% increase compared to April. The debt market isn't a significant hurdle as large developers plan new projects, according to Greg Bonifield, founding partner at Charleston, South Carolina-based apartment developer Woodfield Development. "The debt markets are still very liquid," Bonifield told Multifamily Dive. "A multitude of debt lenders are anxious to deploy capital in the multifamily sector, and at what I consider to be attractive spreads."

However, equity continues to be an issue. "On the equity side, it's very selective there," Bonifield said. "There absolutely is [limited partner] common equity available for new multifamily development." But that equity is interested in well-located projects with strong sponsors. "It is generally more available for very established development groups, but it's limited and strategic, and it's both domestic and foreign," Bonifield said.

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