More multifamily units are under construction than in any year since 1973 but more units are for a particular segment of the market:
Nearly 836,000 multifamily units are under construction, the most since 1973, according to Jay Parsons, chief economist at RealPage. But most new construction targets higher-income tenants and not the lower end, where supply shortages are most extreme, he said.
I have written about the dearth of starter homes and I would suspect a similar dynamic is at play here. Builders and developers can make more money on multifamily units with higher prices. If someone is going to go to all the effort for development and construction – and this can be quite a bit of effort in certain places – they would prefer to gain more financially in the end. The number of places that require the construction of affordable housing alongside market rate housing or seriously pursue cheaper housing are limited.
If these higher-income units come on line, it will add to a bifurcated housing market where those with enough resources have plenty of choices and those with fewer resources have limited and possibly unpleasant options.