Construction of new residential properties in the U.S. only reached 1.18 million units in August, down 0.8% year over year amid a continually weak apartment sector, according to the Commerce Department.
Hurricane Harvey also contributed to the decline in home-building activity, although single-family homes uplifted the overall market. An increase in building approvals also indicated that the industry might rebound in the near future.
Despite the drop in new apartment projects in August, fewer people have struggled to pay rent, according to a report from New York University’s (NYU) Furman Center for Real Estate & Urban Policy. The report noted that those who spend 30% of their income on rent have declined between 2010 and 2015.
This represents good news for property developers, as it also indicates that more people have chosen to rent homes. For this reason, cash-strapped builders and investors should consider taking out commercial multifamily loans to fund their projects.
The rate of return could also be profitable since a larger portion of higher-income households prefer rental properties, which could be one reason for increasing leasing prices, according to the report’s co-author, Sewin Chan.
While renters continue to increase, the issue of low-cost housing still persists due to a shortage of more than 7 million affordable housing units to the poorest Americans, the National Low Income Housing Coalition said.
The NYU report also listed three cities in California that will require the highest premium for those that plan to relocate there. In San Jose, renters that recently moved in likely paid a 33% premium, while renters in San Francisco and Los Angeles paid 29% and 23% premiums, respectively.
Economists believe that demand for housing construction remains strong, which should encourage builders to resolve challenges such as higher input costs and fewer workers.