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A wave of apartments is coming, and we\u2019re already seeing its effect: Falling rents, or minimal rent growth. It\u2019s the talk of the town, but it isn\u2019t the whole story. Permits for apartments, obtained by builders to construct homes, have plummeted close to 30% since the pandemic and are fewer than last year, too, according to a Redfin analysis<\/a> of data from the U.S. Census Bureau.\u00a0<\/p>\n Redfin listed two reasons why this is. First, interest rates are higher, which means borrowing costs to build homes aren\u2019t cheap. Second: \u201cThere\u2019s already a near-record number of new multifamily units hitting the market due to a building boom in recent years, making it difficult for some property owners to find tenants,\u201d according to the analysis. \u201cLess than half (47%) of new apartments that were completed at the end of last year were rented within three months\u2014the lowest share since 2020.\u201d<\/p>\n It can be a bit confusing to hear there\u2019s a wave of supply coming, \u201ca near-record number of multifamily units,\u201d or \u201ca building boom,\u201d because as a country, we\u2019re missing millions of homes<\/a>. Still, as Redfin put it, while \u201cmultifamily building permits and starts have slowed significantly\u2014both have fallen below their 10-year historical average\u2014the number of units being completed<\/em> is still at historic highs.\u201d A lot of this is apartments that began the building process during the pandemic and are just being completed now: a backlog that\u2019s keeping rents where they are. For instance, asking rents are less than 1% higher than a year ago compared to the 18% seen during the pandemic, per Redfin. To be clear, rents are still high and renters are still struggling<\/a>, but they aren\u2019t increasing exponentially anymore. That might not last long, though.<\/p>\n \u201cProperty owners might start jacking up rents again once all of the new apartments hitting the market fill up with tenants and there\u2019s no longer so much supply, which could be the case in a year or two.\u201d Sheharyar Bokhari, a Redfin senior economist, said in the analysis.<\/p>\n And like anything else in the housing world, there\u2019s a lot of local variation. Cape Coral, Florida, and Austin, Texas permitted more apartments than anywhere else in the country this year, followed by Greensboro, North Carolina; North Port, Florida; and Omaha, Nebraska, among other metropolitan areas, particularly in the Sunbelt. (Florida is home to four of 10 metropolitan areas permitting the most multifamily homes, according to Redfin).\u00a0<\/p>\n \u201cFlorida faces high risk from storms, flooding and sea level rise, and is the epicenter of the housing insurance crisis,\u201d the analysis read. \u201cBut builders keep building because there\u2019s still demand\u2014partly due to the influx of out-of-towners who moved in during the pandemic. Permits may also be rising in Florida as homeowners continue to rebuild after Hurricane Ian in late 2022.\u201d<\/p>\n Builders obviously build where there\u2019s demand, and a lot of these places were pandemic boomtowns<\/a>. Nevertheless, multifamily construction has slowed in the majority of areas that thrived during the pandemic. Austin is a great example, as Redfin points out, because it is \u201cposting the biggest decline, despite still being the second largest permitter in the nation.\u201d Although some markets are building more than they were during the pandemic, like Greensboro\u2014and of course, in areas where building boomed, rents are mostly falling.\u00a0<\/p>\n But where are the places with the fewest apartment building permits? California, specifically Stockton and Bakersfield, where no permits were issued in the first five months of this year; that shouldn\u2019t surprise anyone, though, as its housing crisis<\/a> is like no other.<\/p>\n<\/div>\n\nSubscribe to the CEO Daily newsletter to get global CEO perspectives on the biggest stories in business. Sign up for free<\/a>.<\/div>\n