Plans to build apartments in the Golden State have plunged to a 10-year low, dashing hopes of tenants that added units could usher in rent relief.
State permits approved for multifamily housing in the first quarter fell 22 percent to 8,972 units compared to the first three months of last year, the Orange County Register reported, citing figures from the U.S. Census Bureau complied by the St. Louis Fed.
That’s the slowest quarter for multifamily plans since the start of 2014. Across the nation, permits for multifamily developments last month fell 17.5 percent year-over-year, while multifamily starts plunged 43.7 percent from a year ago.
Developers across the state crumpled their building plans as interest rates soared and the economy slowed.
As vacancies have ticked up, rents have flattened, further discouraging new construction.
The year’s sluggish start is in stark contrast to the swift launch for new multifamily housing construction in the last few years, according to the Register.
First quarter permitting was 32 percent below the pace between 2021 and last year, when 159,476 multifamily units were in the pipeline — the largest since 2004-2006.
The new supply of rentals helped tamp down sharp rent hikes during the pandemic.
California rents fell at a 1.4 percent annual rate last month, after dipping 0.8 percent last year, according to ApartmentList. In 2022, statewide rents rose 11 percent, and 5.5 percent in 2021 as tenants sought larger living spaces during a pandemic shift to remote work.
Apartment vacancy in the first quarter averaged 5.2 percent, compared to 5 percent last year and 4 percent in 2022.
While multifamily development of primarily apartments has slowed, plans to build single-family homes have partly rebounded.
From January through March, single-family permits rose 26 percent statewide to 14,215 units.
But that’s still 7 percent off the 2021-2023 pace, when 182,883 houses were permitted, unchanged from the previous three years, according to the Register.
Overall, California home permits were 23,187 units in the first quarter, up 2 percent from a year ago but off 19 percent from 2021-2023’s pace. In those three years, 342,359 permits were filed, the best count since 2005-2007, according to the newspaper.
— Dana Bartholomew
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