Apartment Starts Tumble

September’s increase in apartment starts turned into a sharp decrease in October, the Census Bureau said.

“What goes up, must come down,” said Jay Denton, senior vice president with Axiometrics, Dallas. “The multifamily decrease is really a return to a more natural and sustainable rate of starts.”

Multifamily starts are generally more volatile than single-family starts. In October apartments accounted for most of the 11 percent decline in combined seasonally adjusted construction starts, the Census Bureau reported. Single-family starts declined just 2.4 percent while multifamily starts dropped 25.5 percent from September’s annual rate of 439,000 units to 327,000 units in October.

Axiometrics analyzed Census data and found that annual multifamily starts actually increased significantly in the northeast and the West. The South and Midwest regions saw fewer multifamily starts through October, down 36 percent and 23 percent, respectively.

Examining new permits issued, Census said October’s multifamily permits totaled 405,000 units on an annual basis, a 7.1 percent drop from October 2014’s annual rate but up 8.3 percent from the month before.

New York City issued many of those new permits, Axiometrics reported. The threat of a lucrative property-tax exemption expiring on June 30 motivated many New York developers to race to beat the deadline to receive the exemption. New York’s biggest jump came in May and June; the city authorized 21,045 multifamily units in the 12 months ending in April compared to 61,290 in the 12 months ending in June.

In the end, the city extended the tax break for four more years, but the rush for permits led New York City to issue more than 59,000 multifamily units in the 12 months ending in October, up from 29,000 units in the November 2014-October 2015 period.

But New York’s surge did not account for all of the national increase, Axiometrics said. Even with the Big Apple’s permit surge removed from the calculation, 369,000 multifamily units received permits in the 12 months ending in October, up from 349,000 a year before.