Conditions remain challenging for multifamily developers, according to the latest round of the National Multifamily Housing Council (NMHC) Construction Survey.
Conducted between Dec. 6 and 15, the survey found that 84% of developer respondents reported construction delays, while 58% said they are experiencing repricing increases in projects at an average rate of 8%. Of those experiencing delays, similar to the previous quarter, 84% cited permitting delays, while 79% reported delays in starts.
Almost half of those experiencing delayed starts, 46%, said permitting, entitlement, and professional services were primarily to blame; this is down from 54% in the previous quarter. The second most common factor for delays was economic uncertainty for 39% of respondents, followed by the availability of construction financing, or lack thereof, for 29% of respondents. In addition, 30% of respondents reported delays due to materials sourcing and delivery.
However, one positive note from respondents is that permitting seems to be speeding up. A smaller share, 12%, reported nine-plus months for permitting in this survey round compared with 22% in September.
Another positive nugget is that lumber prices, on average, have declined for a third straight quarter, falling 5% over the last three months. However, overall, costs continue to rise. Electrical components have seen a 13% jump, while exterior finishes and roofing, appliances, and insulation are up 9%.
“While the worst of construction and labor costs and delays may be in the rearview mirror, we should understand the multifamily business still faces very real headwinds when it comes to the construction and renovation of communities,” said NMHC president Doug Bibby. “Rents are decreasing from the heights experienced over the last two years, but we still need far more housing of all types in cities and towns across the country. As lawmakers focus on housing challenges in their communities, they should work with the private sector to implement policies and procedures that speed the creation of new housing and reduce costs and unnecessary regulations.”
Regulations from all levels of government account for an average of 40.6% of development costs, according to a report released by NMHC and the National Association of Home Builders earlier this year. Three-quarters of respondents said they have encountered NIMBY opposition to one of their multifamily communities. According to the NMHC, battling the opposition adds an average of 5.6% to total development costs and delays the completion of the properties by an average of 7.4 months.
