Delays to construction of multifamily projects could be detrimental if starts tank further, according to the National Multifamily Housing Council
More than half of all construction firms working on multifamily projects are experiencing construction delays due to the COVID-19 pandemic, according to a new survey by the National Multifamily Housing Council (NMHC).
NMHC says they will conduct the survey on a bi-weekly basis in efforts to track how the coronavirus outbreak is affecting multifamily construction.
Of the 56% of construction firms that reported delays, more than three-quarters are dealing with delays in permitting, and 70% are seeing delays in starts. Lack of materials are affecting 1 in 4 respondents and 44% say labour constraints due to the pandemic are also causing delays.
While multifamily projects are mostly exempt from a lot of the construction moratoriums across the country, there are some cities like Boston, where everything has come to a halt.
“Delays are happening for a number of reasons: government offices are shutting down or have reduced hours, so approvals and inspections are delayed, and permitting is taking significantly longer,” said Sarah Yaussi, vice president for business strategy at NMHC.
Total housing starts slumped 22% in March and overall permits declined by almost 7%, according to a report from the U.S. Housing and Urban Development and Commerce Department. The multifamily sector was down almost 32%.
“Housing has been deemed an essential business in most of the nation, and in the few states where the governors have not acted, we urge them to deem construction as essential,” said Dean Mon, chairman of the National Association of Home Builders (NAHB) in a blog post. “Housing can help lead an eventual rebound, as it has done in previous recessions.”
73% of construction firms say they are implementing new strategies and adapting to new technologies in efforts to keep things moving forward in the wake of the pandemic. “Firms are using drones and video or photo submissions to help overcome hurdles around approvals and inspections among social distancing rules,” Yaussi added. With construction firms taking the health and safety of their workers seriously, she says many are making changes to scheduling to limit the number of people on site at one time.
While the multifamily sector wasn’t as immediately impacted by coronavirus compared to other commercial real estate sectors like lodging and hospitality, NMHC warns that it could be devastating if construction doesn’t continue.
“We were getting to a point where we were meeting demand before the pandemic hit, and that demand hasn’t changed,” said Caitlin Walter, vice president for research at NMHC. “We were dealing with a major affordability problem before this crisis, so if the delays don’t catch up, that problem will be exacerbated.” During the Great Recession, Walter says construction starts tanked and there needs to be a concerted effort to make sure that doesn’t happen again.
Activity was particularly weak in the Northeast last month, which can be attributed to how severely New York has been hit by the outbreak. The Mortgage Bankers Association (MBA) also shared their concern over the sharp decline in multifamily building but remains optimistic.
“It is important to note that construction activity was running strong in the first two months of 2020, and even with March’s decline, single-family starts were 2.8% ahead of last year’s pace, and building overall remained 1.4% higher,” said Mike Fratantoni, senior vice president and chief economist at MBA. “Similarly, permits declined for the month, but single-family remained ahead of last year’s pace, indicating that plans for building will continue, despite the sharp drop in economic activity occurring in the second quarter.”
