New Multifamily Rental Share Remains Strong

Posted on August 25, 2016

The NAHB’s Robert Dietz analyzes second-quarter data from the Census Bureau to look at how the size of the typical new multifamily unit is shrinking, since the for-rent side of the industry is outpacing the for-sale side.

The average square footage of a multifamily unit started in the second quarter was 1,161, down from the post-recession watermark of 1,247 square feet. But as more for-sale multifamily housing is built in the coming years, Dietz expects the average size to start moving back up.

The share of multifamily housing starts built for-rent fell to a historical low of 47% during the third quarter of 2005. It is currently (93%) above the approximate 80% share recorded during the 1980–2002 period due to elevated levels of rental demand.

The reason for some of the change in multifamily average size is due to market mix. Renters tend toward smaller units than owner–occupiers. In 2012, for example, the median size of all multifamily units completed was 1,098 square feet. However, for rental apartments the median was 1,081, while it was a larger, 1,466 for for-sale multifamily residences. When the for-sale share of multifamily returns to historical norms in the years ahead, the size of a typical newly built multifamily housing unit will rise accordingly.