When it comes to new apartment construction, Chicago is lagging behind many other big cities. A new report says that the Windy City ranked just 45th out of the 50 largest metropolitan areas in 2023 in new apartment construction on a per-capita basis.
In a new report published in early June, Apartment List said that new multifamily construction starts are falling across the country, not just in Chicago.
This isn’t surprising. Apartment List said that in 2022, building permits were issued for 707,000 multifamily housing units across the country. That’s the highest this figure has been since 1985.
As Apartment List said, this construction boom took place against a backdrop of skyrocketing rents and historically low interest rates. These two factors made multifamily developments especially attractive to investors.
But since 2022, these conditions have changed. Apartment List said that the national median rent has been declining year-over-year since last summer, and interest rates have risen to their highest levels since 2007. In response to these changing conditions, developers have begun to pull back from investing in new multifamily projects.
Reacting to these economic challenges, developers have cut back on new apartment construction. In its report, Apartment List said that in 2023, permits were issued for 591,000 multifamily units, a 16% decline compared to 2022.
Based on data through April, 2024 is on pace to see permits for 525,000 new units, which would represent another year-over-year decline of 11%.
This doesn’t mean that the country isn’t seeing the addition of plenty of new apartment units this year. This delivery boom, though, is based mostly on permits issued in 2022 or earlier.
According to Apartment List, 450,000 new multifamily units hit the market in 2023, an increase of 22% compared to 2022 and the highest level since 1987. The first four months of 2024 have seen an even sharper increase in multifamily completions, and if the current pace continues, the United States will end the year with 588,000 new apartment units.
The number of multifamily units under construction peaked in late 2023 at over 1 million, a record. The number of units under construction has been gradually declining now as the number of completions has begun to outpace the number of new units being issued, according to Apartment List. But even after the recent decline, the number of units still in the pipeline (919,000) remains higher than at any point in history before the recent peak.
Austin, Texas, leads the way in permits for new apartment construction. Apartment List reported that in 2023, there were 9.2 new multifamily units permitted in the Austin metropolitan area for every 1,000 residents. This made Austin’s multifamily permitting activity an impressive 61% higher than that of second-ranked Raleigh, North Carolina.
How do other Midwest and Texas cities perform? Nashville leads the way, with Apartment List reporting that in 2023, Nashville permitted 4.7 new apartment units for every 1,000 residents. That was good for fourth among the country’s 50th largest metropolitan areas.
Dallas saw 3 permitted apartment units for every 1,000 residents in 2023, while San Antonio saw 2.9. Louisville saw 2.9, too, while Columbus, Ohio, and Minneapolis both saw 2.8.
Chicago tied Memphis for 45th place, with each metro area seeing 0.7 new permitted apartments for every 100,000 residents. Trailing Chicago were Detroit and Cleveland, both of which saw just 0.5 new permitted apartment units for every 1,000 residents.
