The outlook comes despite an expected moderation in multifamily housing starts in 2018 and 2019.
“For the foreseeable future, production of multifamily housing is expected to be running at a trend level where supply is meeting demand,” NAHB Senior Economist Michael Neal said.
While starts are projected to total 360,000 in 2017, 2018 is expected to record a 2% decrease to 354,000 and 2019 to post another 3% decline to 344,000. Neal said, however, that these projected declines do not signal weakness in the segment.
“From 1995 through 2005, multifamily starts averaged 335,000,” Neal said. “Construction activity during the past four years has been running above this trend, and we are seeing the market stabilizing near more normal production levels.”
Neal said the low inventory of homes for sale is one factor contributing to stabilizing multifamily activity. He said that the lack of homes for sale is causing some renter households looking to own having to rent for longer than they expected.
With the number of rent-burdened households increasing, The Lawson Companies President Steven Lawson said certain factors are restricting supply even as demand for affordable rentals continues to increase.
“Demand is far outstripping supply and the supply-side of the equation is constrained by Low-Income Housing Tax Credit pricing, rising construction costs, and higher interest rates,” Lawson said.
Lawson also said that although corporate tax rates have become lower under the tax reform law, tax credit prices have also decreased.
“Rising labor and materials costs as well as falling prices for Low-Income Housing Tax Credits have changed the landscape so that some projected affordable projects are no longer viable,” Lawson said. “Moreover, labor shortages are driving up labor costs and spreading out construction schedules.”
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Housing supply in the multifamily segment will meet demand as starts remain at a sustainable level, according to experts participating in a press conference during the National Association of Home Builders (NAHB) International Builders’ Show.