According to a recent study by Yardi Matrix, a multiunit construction analytics firm, there have been significant shifts in the number and types of multifamily housing developments over the past decade, including market rate, affordable, single-family rental, senior, and student housing.

The report mentions there may be a delay in gathering the data for starts, so the results for 2023 are still incomplete. Once all the data is available, analysts believe the decline in multifamily starts for 2023 will be even smaller than currently shown. Compared to the starts recorded in the first three quarters of 2022, the number of starts in the first three quarters of 2023 decreased by 11.6 percent.

Market Rate Segment Grows While Contracting

While the U.S. Census Bureau provides a monthly report on residential construction, its findings differ from Yardi’s new report in that it does not distinguish single-family rentals from other types of single-family starts.

According to Yardi Matrix, the total number of multifamily units began to increase in 2013, reaching a peak of 539,263 in 2022. As of 2023, 390,369 units have been recorded, but this number is expected to be adjusted upward as more data becomes available.

The first chart shows the history of the number of multifamily units started by year. In this view, market-rate units dominate the market.

The following chart shows the relative growth in different market segments compared to their numbers of starts in 2013.

According to this chart, the market rate segment experienced a significant increase in multifamily starts between 2013 and 2022. However, this growth was outpaced by other segments. Single-family rentals saw the most dramatic increase, starting from a small number of starts in 2013 and growing to more than 13 times that amount by 2022, mostly occurring after 2019. The senior housing segment also saw considerable growth, with the number of starts in 2022 reaching eight times the amount recorded in 2013.

The chart below depicts the percentage of unit starts in various market segments over the past decade. The share for the market rate segment has not been included as it is the remaining portion after totaling all other market segments shown. Just for clarification, multifamily starts accounted for 86 percent in the market rate segment in 2013 and decreased to 77 percent in 2023.

According to the chart, there has been a consistent increase in the share of affordable market segment starts since 2013. The single-family rental segment has also experienced significant growth, particularly after 2019 during the post-pandemic period. The senior housing market has also gained share, while student housing has seen a decline. However, there has been a slight rise in the number of student housing units started per year.

Regional Shifts in Growth in Starts

According to the report, several geographic regions that experienced a surge in multifamily construction starts after the pandemic have now seen steep declines through 2023. Out of the 22 markets that were responsible for almost half of the starts in 2022, only four did not witness a decrease in starts by Q3 of 2023. Interestingly, three of those markets saw an increase in starts by more than 48 percent, specifically Dallas-North (48.3 percent), Raleigh-Durham, N.C. (48.7 percent), and Tampa-St. Petersburg, Fla. (62.5 percent). 

Markets, where construction activity remained at or below pre-pandemic levels, were better able to maintain their number of starts in 2023. Yardi Matrix identified 66 such markets where starts increased significantly in the first three quarters of 2023, including Boston (35.1 percent) and Kansas City, Mo. (41.6 percent).

Looking Ahead

According to Yardi Matrix's projections, there will be a continuous decline in construction starts until 2024. However, the high number of ongoing construction projects will result in a significant amount of completions until early 2025. The report predicts that the lowest point in completions will not be reached until 2026.