New Apartment Construction: 1 Million Units Built in 3 Years, Another Million to Be Added Until 2025

New apartment construction in the U.S. is experiencing its best years on record: The pandemic building boom brought 1.2 million apartments to the market in the last three years and 2023 is also shaping up as a new peak year for construction as developers are expected to open 460,860 rentals by the end of December. Notably, the New York metro area has once again taken the lead this year, with Dallas and Austin, TX, following at a great distance.

Specifically, our annual new apartment construction report based on Yardi Matrix data shows that the number of deliveries is expected to remain high until 2025 when the echoes of the current economic headwinds will begin affecting construction as well. But so far, in the last three years, America has been benefiting from a construction boom not seen since the 1970s.

Households grew at a rapid rate after the pandemic as job growth boomed and young adults moved out of their parents’ homes. At the same time, “work-from-home prompted renters to form their own households to gain more living space for offices, children and pets”, said Doug Ressler, manager of business intelligence at Yardi Matrix.

In other words, developers are working tirelessly to complete projects that were approved for construction at the height of the pandemic in order to meet the needs of renters seeking more apartments as hybrid work persists amid this urban churn.

However, almost two-thirds of the apartments built during the pandemic boom are clustered in just 20 high-growth metros, which make up about 41% of the total renter population in the U.S. Therefore, for many other places, the new supply barely made a dent in the existing supply. What's more, around 89% of the apartments completed in the last three years are high-end and, thus, target upper-middle- and high-income renters.

Looking at the top metro areas for apartment construction since 2020, Dallas claims the first spot, with New York and Houston coming in second and third place, respectively. Zooming in to the city level, highly popular Austin takes the crown with the most apartments built in the last three years, followed very closely by Houston — all the while New York’s most prominent boroughs failed to enter the top 20 in this category.

Apartment construction is booming, but headwinds await new completions in the coming years

The supply growth is likely to go slower after the current round of projects is completed. “Tightening of bank lending standards — combined with rising costs of construction materials, labor and land — has made new projects harder to pencil,”  Ressler added. 

“Construction debt starts at 8% interest, and most banks only lend 60% or less of the total cost of a project. Junior construction debt is even more expensive, with interest rates in the mid-teens. This financing structure can make it challenging for companies to initiate new construction projects unless they already have a substantial amount of capital on hand.” 

Doug Ressler
Senior Analyst & Manager of Business Intelligence, Yardi Matrix

As such, the number of new apartments is expected to drop by 15% year-over-year — from 484,000 in 2024 to 408,000 in 2025 — with new completions bottoming out in 2026 at approximately 400,000 units. Then, according to Yardi Matrix estimates, the pace of construction is projected to gradually recover in 2027 and 2028.

New York leads the country in new apartment construction once again, with 33,000 units to be opened in 2023

The New York metro is far from hitting the brakes on its spectacular performance in terms of post-pandemic apartment construction. In fact, New York is America’s #1 builder in 2023, with no less than 33,000 new rental units set to come online by the end of the year. Here, almost one-third of the apartments that will be added throughout the metro this year will be located in Brooklyn (9,825 units, more exactly), while 4,430 rentals will be opened in Queens and 3,770 rentals will be completed in Manhattan.

This construction spree is a direct result of New York’s long-standing housing shortage, which has created pent-up demand for apartments. In addition, New York is the only Northeastern location in the top 20 metros for apartment construction in 2023.

Lagging behind (with almost 10,000 apartments less than the #1 contender) is Dallas metro, where developers are on track to build 23,659 new rentals by the end of the year. Specifically, Dallas proper will add 4,176 new apartments in 2023, followed by Fort Worth, TX, with 2,469 apartments and Frisco, TX, with 2,296 apartments.

Yet, that’s still not enough to meet the soaring demand for apartments throughout the metro, especially as America’s new boomtown is facing a severe shortage of housing units. To put things into context, Dallas gained more residents than any other U.S. metro between 2021 and 2022 alone (170,396 new residents for a total of 7.9 million, according to U.S. Census data). And, more and more people are expected to relocate to this thriving area in the coming years as businesses continue to expand. Accordingly, one possible solution to alleviate the housing shortage is to use its untapped vacant land and speed up the permitting process to create up to 100,000 new apartments.

In Austin (#3), another fast-growing Texas metro, developers are set to open 23,434 new rentals by the end of 2023. The vast majority of apartments are concentrated in Austin proper (12,692 units), followed at a great distance by Georgetown, TX (2,154 units), and Round Rock, TX (1,481 units).

Here, as well, the metro's existing supply is struggling to keep up with demand as hundreds of new residents are relocating to the area each day. That said, the metro has long been a magnet for workers as major employers like Tesla and Samsung Electronics continued to expand their presence or establish their headquarters here.

By comparison, new apartment construction is slower in Houston, the fourth Texas location in our top 20. Specifically, the metro is estimated to add 13,637 new apartments this year, which puts it in eighth place in the ranking. However, the metro (along with Dallas, Austin and San Antonio) is keen on building single-family rentals to meet the needs of those who are not yet ready to become homeowners.

Next, the Miami metro is in fourth place for new apartments projected to be completed by the end of 2023, with 20,906 units in total. The majority of these new rentals will be built in Miami itself (9,362 units), followed by highly desired Hialeah, FL (2,055 units), and West Palm Beach, FL (1,175 units).

Once again, the upcoming apartments are not enough to keep up with the skyrocketing demand for housing — even though developers will open about 30% more new rentals this year compared to 2022. As a matter of fact, this rental season again, competition is so fierce in the Miami metro that a staggering 24 renters are competing for the same apartment. That’s the largest number of prospective renters per available unit in the country.

Rounding out the top 20 metros for new apartment construction in 2023 are Atlanta; Phoenix; Los Angeles; Houston; Washington, DC; Denver; Charlotte, NC; Raleigh, NC; Orlando, FL; Seattle; Nashville, TN; Tampa, FL; San Francisco; Jacksonville, FL; Minneapolis; and Chicago.

Click on each tab to see the number of new apartments estimated to be completed in 2023 in various metros.

1 million apartments built in the last 3 years, with another 1 million units expected through 2025

The pandemic sparked a rental frenzy across the U.S. as more people craved flexible and comfortable living spaces. So, developers rose to the challenge and delivered a whopping 1.2 million new apartments between 2020 and 2022. The peak of this construction boom was in 2021, when nearly 440,000 brand-new units opened nationwide as Americans embraced remote work and relocation as ways to explore better opportunities and lifestyles.

In particular, Dallas built the most apartments during those three years — a whopping 76,660 units — as developers across the metro hustled to finish projects that got the go-ahead during the pandemic. The booming job market in the metroplex (supported by the industrial and tech sectors) fueled this construction spree.

Next up is the New York metro area, which opened 66,070 brand-new apartments between 2020 and 2022 in an effort to provide much-needed housing to newcomers and existing residents alike. Additionally, the metro continued to see strong demand for rentals even after the pandemic, despite the fact that many high-paying professionals who were working remotely chose to relocate to sunnier places, like Florida, North Carolina and Texas.

Still, the New York metro delivered the most apartments in 2022, although none of the Big Apple’s most prominent boroughs made it into the top 20 for apartment construction during the pandemic boom. Surprisingly (or, maybe, not, given North Jersey’s growing popularity with renters) Jersey City, NJ, lands in 20th place with 8,083 new apartments added during those three years. Brooklyn comes right after it with 7,859 new rentals (#21), while Manhattan (#28) and Queens (#34) lag quite far behind with 6,403 units and 5,489 units, respectively.

Coming in third is Houston, where developers opened 53,741 new apartments between 2020 and 2022. The metro is also home to several major companies such as ExxonMobil and Chevron — both of which expanded their presence in the area during those three years — that attract a large number of workers, further supporting demand for rental apartments.

Likewise, the Austin metro opened a little more than 45,000 apartments during that same timeframe, to claim fourth place in our ranking. Backed up by its business- and tax-friendly climate, Austin has evolved into “the place” for unicorns and tech giants in recent years, consequently attracting many techies from California and other states.

Rounding out the top 5 is the Miami metro, where developers built almost 43,000 new apartments in the last three years. But even with this influx of new units, the supply of apartments is still not enough to meet demand in this sought-after destination for renters.

The cities of Austin & Houston top the chart for new apartment construction between 2020 and 2022

At the city level, Austin led the nation in apartment construction between 2020 and 2022, adding a whopping 29,115 new units. Here, construction peaked in 2022, with 11,546 units added that year.

Houston was not far behind with 28,423 new rentals opened in the same period. And just like its sibling, the Bayou City saw its highest number of completed apartments in 2022, with 11,165 units added to the market.

Next, Atlanta boosted its apartment supply by 17,886 new rentals from 2020 to 2022. Here as well, the city's busiest year for construction was 2022, when 7,542 new units were opened.

Interestingly, Los Angeles saw a construction boom of its own between 2020 and 2022. Developers built a combined 17,779 new apartments during those three years, pushing the city to fourth place in our ranking at the city level. However, that’s not enough to alleviate Los Angeles’ historic housing shortage anytime soon.

According to a recent study published by the Los Angeles Business Council Institute, it takes almost four years to complete a new apartment property here. To that end, the city would need nearly 457,000 new housing units by 2029 to meet its housing need, but the current pace of construction is too slow to achieve this goal.

Moreover, the housing shortage is projected to further deepen as the city is expected to grow by 400,000 residents by 2029. This means that, even if developers were able to build new housing units at a faster pace, it still wouldn't be enough to meet the demand.

Finally, Washington, DC; Charlotte, NC; Miami; San Antonio; Seattle; Chicago; Denver; Nashville, TN; Orlando, FL; Phoenix; Columbus, OH; Portland, OR; Fort Worth, TX; Minneapolis; and Jersey City, NJ, round out the top 20 cities for new apartment construction between 2020 and 2022.

Click on each tab to see the number of rental apartments built in various cities in the last three years.

Methodology

RentCafe.com is a nationwide apartment search website that enables renters to easily find apartments and houses for rent throughout the U.S.

To compile this report, RentCafe’s research team analyzed new apartment construction data across 296 U.S. metropolitan statistical areas. The study is exclusively based on apartment data related to buildings containing 50 or more units. Metros with less than 300 units or less than two properties/buildings were not included.

The Bronx and Staten Island were not included in the New York metro data set.

Apartment data was provided by our sister company Yardi Matrix, a business development and asset management tool for brokers, sponsors, banks, and equity sources underwriting investments in the multifamily, office, industrial and self-storage sectors.

Apartment projections at metro and city level for 2023 were calculated based on a Yardi Matrix proprietary algorithm that includes confirmed and likely completions for 2023 based on the issuance of a certificate of occupancy. After the certificate of occupancy is issued, the status of the property can be considered “completed”.

Apartment projections are estimates and subject to change. Actual apartment completion dates depend upon a variety of factors and may change.

Data on estimated population by metro area was according to the U.S. Census Bureau.

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