<body><div><figure><img src="https://img.particlenews.com/image.php?type=thumbnail_580x000&amp;url=3xb8Xg_0v0c6EZg00" alt="https://img.particlenews.com/image.php?url=3xb8Xg_0v0c6EZg00" width="785" height="563" ></figure>Yes, we’re spending a lot of time talking about housing this month, particularly multifamily. There are three primary reasons we’re putting so much focus on the sector at the moment:1. Housing makes up 27% of the Arizona construction market.2. Multifamily’s Arizona construction market share is valued at $7.3B.3. We get deluged with so many new studies, findings, projections, conclusions and general information that some weeks multifamily news makes up most of our individual inboxes.So, let’s take a few minutes to get you caught up on the news we didn’t touch on in our housing trends column a couple of weeks ago or the BEX 2024 Private Development Summit recap last week.U.S. on Pace to Shatter Delivery RecordLet’s start with the biggest of the big news items making multifamily waves this week: For the third consecutive year, The United States is on pace for a record number of apartment deliveries in 2024.Actually, that’s the second biggest point. The real Number One item is 2024 is set to be the biggest year for deliveries in history. With an expected completion count of 518,108 apartments according to data released by RentCafe last week, 2024 will be the first time the national multifamily market has delivered more than 500,000 units in a year.The big dogs in the pack are no surprise. Metro New York City leads with an expected 32,935 units, followed by Dallas with 32,932. You read that correctly. The Dallas area is expected to close the year having delivered a whopping three fewer units in total.The gap then widens by nearly 11,500 units, with metro Austin projected for 21,506. Metro Phoenix sits at a comfortable fourth with 20,141. According to RentCafe, “Most of this construction is concentrated in Phoenix proper, and developers are on track to deliver 7,389 units, representing nearly one-third of all apartments slated for completion in the area.”A Slowdown is Already HappeningThe bad thing about reaching peaks, however, is troughs inevitably follow. The report says, “However, unlike the steady growth in deliveries between 2019 and 2023, the next five years will see a gradual slowdown in construction each year until 2027, with a big jump expected in 2028. This slowdown is mainly because apartment construction starts have significantly dropped so far in 2024 compared to the same time in 2023. Moreover, apartment construction starts are expected to keep falling throughout the next year as developers struggle to get financing due to stricter loan standards amid economic uncertainties, which causes delays in projects.”Data from the Census Bureau and Department of Housing and Urban Development bears this out. Government sources say that while June housing starts came in at 3% more than May’s estimate of 1,314,000, they were 4.4% less than June 2023. Single-family starts were marked at 980,000, with developments of buildings of five units or more adding another 360,000.For Arizona, Federal Reserve Economic Data shows building permits at 5,351 for June 2024, up from 4,490 in May. The state has been hovering around the 5,000 unit mark since July of last year.Little Impact on Housing Crisis, AffordabilitySo, with all these new units coming to market, the housing supply and affordability crises are winding down, right?No. No, they’re not. Not even a little.The problem is as simple as the solutions are complicated. Arizona under-built housing, particularly apartments, for decades. The state’s population has been increasing since at least the 1990s, and it exploded between 2001 and 2008. Between 2008 and 2012 was the only time since the turn of the millennium that annual population growth fell below 1%. From 2013 through 2020, it ranged between 1% and 1.5%, and it has been slightly more than 1.5% since 2021, according to state data.In terms of zoning and market mindset, Arizona has been extremely single-family focused when it comes to housing. That mindset is still deeply entrenched and remains a fundamental component underlying the currently escalating NIMBY movement across the state. It’s not remotely true, but a plurality of the population thinks apartments are shoddy, claptrap breeding grounds for crime and vermin.Paraphrasing longtime AZBEX source and industry consultant Thomas Brophy, “Anyone who can afford current rent rates in metro Phoenix isn’t exactly ‘riff-raff,’ but that’s the perception.”Because multifamily was often thought of poorly, if it was thought at all, it was not as major a market focus as it should have been until the pandemic. A Phoenix delivery volume of 10,000 units was a nearly Olympian achievement. Deliveries in 2023 were slightly more than 17,000. In January, we cited predictions of 33,362 for 2024. “Pessimistic” analysts were predicting 20,000.Going back to the numbers at the top of this column, we see that halfway through the third quarter of the year, the rip-roaring rate of 20,104 apartments we’re likely to deliver this year barely covers the pessimists’ spread.It also does nothing to address the need for diversity of housing types and cost levels. If approximately 90% of all units built in the last several years, and a similar volume of units in development, are in the top two tiers of luxury residential, that’s only slightly more than 2,000 units provided to the population that needs units below the top echelon, and that population is several times larger.While the delivery projections in that January piece were wildly off, the demand assessments were not. Two years ago this month, we ran a detailed examination of supply, new deliveries, pent-up demand and population growth. The data then showed, “Since 2018, demand has exceeded supply in 15 quarters out of the 18 shown… Over the same period, demand exceeded supply by approximately 25,000 units.”If we fast forward back to today, we see a set of conditions that are consistently being mislabeled as an oversupply because units delivered are closer to meeting units needed by individuals at a given moment. The snapshot, however, is not the total picture.The popular number bandied about by housing experts for years has been Arizona is short 270,000 housing units. That number has not been adjusted to account for units delivered versus new residents in a while. With the increase in deliveries over the past three years, it’s likely that estimate has not gotten appreciably worse, but with a hole that deep and new arrivals still coming every day, it also has probably not gotten appreciably better.Zillow recently issued a report for the country as a whole showing a shortage of 4.5 million homes.A national need of 4.5 million. A statewide need of 270,000. Given record deliveries in the face of rising land costs, decades-high interest rates, more restrictive lending standards, labor shortages, supply chain and materials challenges, zoning and entitlement difficulties, drawn-out permit and plan approvals and a nearly endless list of other problems, what the market has delivered is impressive.It is not, however, enough, and it is most certainly not an oversupply.</div></body>

Mountain View, CA

NewsBreak

Despite Record Apartment Deliveries, Shortages Remain

Yes, we’re spending a lot of time talking about housing this month, particularly multifamily. There are three primary reasons we’re putting so much focus on the sector at the moment:. 1. Housing makes up 27% of the Arizona construction market. 2. Multifamily’s Arizona construction market share is valued...