Apartment Construction Slows as Investors Bet on Higher Rents
Supply and Demand
Apartment construction across the United States slowed significantly in 2023 due to rising costs, supply chain issues, and a shortage of skilled labor. According to the National Association of Home Builders (NAHB), the number of new apartment units started in 2023 was down 15% from the previous year.The slowdown in construction has led to a tightening supply of apartments, which has pushed up rents. In many markets, rents have increased by 10% or more in the past year. This has made it more difficult for people to find affordable housing, and it is contributing to the growing number of people experiencing homelessness.
Investors Bet on Higher Rents
Despite the slowdown in construction, investors are betting that rents will continue to rise. This is because the demand for apartments is still strong, and there is a limited supply of new units being built.As a result, investors are buying up apartment buildings and raising rents. This is making it even more difficult for people to find affordable housing, and it is contributing to the growing wealth gap.
Policy Implications
The slowdown in apartment construction has significant policy implications. First, it is making it more difficult for people to find affordable housing. Second, it is contributing to the growing wealth gap. Third, it is putting a strain on local governments, which are struggling to provide services for the growing population of homeless people.Policymakers need to take steps to address the slowdown in apartment construction. This could include providing financial incentives for developers to build more affordable housing, streamlining the permitting process, and investing in workforce development programs to increase the supply of skilled labor.
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