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Oakland University SBA Data Center

Single Family v Multifamily Housing Starts

A surge in apartment construction followed the housing bust. Changing demand caused builders to put more effort into apartment buildings than single family construction. Rentals are attractive owing to difficulty in qualifying for a mortgage. Renting makes it easy to relocate as the job market evolves. New college graduates are faced with student loan debt and uncertain job prospects making buying difficult. Some fear the consequences of buying as a result of the housing bust. The number of people saying they should buy a home fell to 61 percent, a record low according to a survey conducted by Fannie Mae in December 2014. The U.S. homeownership rate has dropped to 63.9 percent at the end of 2014 from a peak of 69.4 percent in 2Q 2004, the lowest level in 20 years.

The charts below show the change in building permits since 2004 on an annual basis for Single-family and Multi-unit construction for the U.S. and metro Detroit. Few builders construct single-family houses expecting to rent and many multifamily properties are built with rentals as the aim.

Multi-unit construction in the U.S. has revisited its pre-recession level while single-family construction remains depressed. In 2010 less than 17 percent of new residential construction in the nation was in multifamily buildings. By 2014 the proportion doubled.

The situation in metro Detroit diverges from the U.S. explosion in multi-unit construction. While single-family construction remains depressed similar to the nation, multifamily construction is also substantially below pre-recession levels. Metro Detroit has among the lowest share of population in rental housing of any major metropolitan region, 33 percent (Census Bureau American Factfinder 2013). Atlanta has 49 percent, Chicago 52 percent, and Dallas 53 percent.

Expect metro Detroit builders to respond to the surge in rental demand, catching up to the national trend in multifamily construction. Local builders responded in 2014 with 1,386 multifamily permits issued up from 778 in 2013 and 767 in 2012 (Home Builders Association of Southeastern Michigan).

New rental properties with amenities such as technology, fitness, and location near restaurants and shopping will help attract entry level and middle-income workers to the region and retain college graduates.

Jonathan Silberman, PhD
Laura Tack, Research Assistant

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