Permit requests to build apartments jumped to a three-year high last month. In 12 months, they’ve surged 63 percent.
Blame the housing bust, which left many people without the means, the credit or the stomach to buy. More people need apartments. The demand has driven up monthly rents. And apartment-home builders are rushing to cash in.
That said, the overall home market remains depressed. Builders are still struggling. They broke ground on a seasonally adjusted annual rate of 628,000 homes last month, the government said Thursday. That’s barely half the pace that economists equate with a healthy market.
High unemployment, stagnant pay and waves of foreclosures have slowed sales of single-family homes, which make up about 70 percent of the home building market. Apartment construction may be surging, but it’s a small portion of the industry.
More apartment building won’t add enough jobs to reduce unemployment or hasten an end to the housing crisis. Still, it’s contributed to the overall economy’s growth for two straight quarters. And many economists expect apartment construction to grow for at least the next 12 months, as long as the economy avoids another recession.
“You’re not going to see apartments as an economic driver,” said James Marple, senior economist at TD Economics. “But it’s renters who are clearly going to drive the demand for housing.”
It’s also worth keeping the increase in perspective: The growth in apartment construction is coming off extremely low levels.
Last year, for example, only 146,000 apartments were built. That was the fewest since 1993. This year’s pace isn’t much more. By comparison, in 2005, just before the housing market went bust, 258,000 apartments were built.