Tim Henderson, stateline.org
The new apartments were built in 2024 than any other year since 1974, but higher interest rates could be a wet blanket for the boom, along with the Trump administration’s tariffs and the deportation of potential construction workers.
A US Census Bureau survey found that almost 592,000 new apartments were closed last year. This was the most end since the 1970s, when baby boomers caused a surge in construction when they moved out of their childhood homes. In 1974, 693,000 new apartments were built, with about half of the households in the country.
However, as the newly completed apartments come online, there was a sharp slowdown in construction. Increased supply has led to lower rents, increased vacancy rates, and new developments have become less profitable. Some experts also say that tariffs on construction materials and labor shortages caused by immigrant dips create headwinds for new construction.
Despite historic completion rates, apartment initiation fell 27% compared to 2023, down 37% from the recent peak of 531,000 in 2022. The apartment started at its lowest decline since 2013.
Housing experts have long lamented that there are not enough apartments or detached homes in the United States. At least it’s not a place where people want to live or get it at a price. Estimates for the national housing shortage last year vary widely from 1.5 million homes and apartments to 20.1 million. Since then, another 1.6 million homes and apartments have been built. Most experts estimate a shortfall of between 1.5 million and 5.5 million, according to the Harvard Center for Housing Research.
According to Statalin analysis, some states are building apartments faster than others. Although completions have not been tracked by the state, South Dakota, Utah, Arizona and Colorado have recently been granted high-value permits leading to new apartments. Prices are lowest in Mississippi, Wyoming, West Virginia, Rhode Island, Oklahoma and Alaska.
The large jump in apartment building has its roots in 2021 and 2022 when interest rates were low and rent growth was high, said Rob Warnock, a senior researcher at Apartment List, a company that posts online listings for rental lists.
“These new apartments came out online in 2023 and 2024, but delivery is slower today, but there are still many apartments in the pipeline,” Warnock said.
According to a report released last week by Apartment List, it has fallen by about $50 (3.5%) a month since its peak in 2022. Apartments vacancies are 6.3%, the first in 15 years, at 6.3%, covering rents, but may be preferred if construction slows down.
Apartment buildings have been a bipartisan priority as detached home prices skyrocket further from the affordable range for young families. In South Dakota, Republican-controlled Congress worked to extend the construction boom with grants and loans under the state’s Housing Infrastructure Finance Program. The program has put $200 million in state and federal funds to defend the costs of developing new areas, including roads, sewers and streetlights.
Republican Sen. Casey Crabtree, sponsoring the proposal signed into law in 2023, told Stateline that it was necessary to address housing shortages, particularly in rural areas of the state.
“We have a dramatic shortage of workers,” Crabtree said before the 2023 vote.
Armand Domalewski, American co-founder of Immy Democrats, said overregulation is a barrier to housing construction in many areas controlled by his party.
“Many blue government areas and cities have very limited zoning, impact fees and other rules that make home construction very difficult,” Domerski said. Another barrier, he said, was local opposition.
“If it was just a free market, developers would want to build it in a place like California, where prices are the best and rents are the best.
In California, the 2021 Home Act aimed at promoting more affordable housing and facilitating labor shortages, but in some areas it faces local opposition. Late last year, Democratic Gov. Gavin Newsom signed several measures aimed at streamlining regulations and cracking down on local resistance to the 2021 law.
South Dakota approved nearly 6,000 permits for apartment units in 2023 and 2024. Once completed, approximately 1.4% will be added to a total of 417,000 residential units in 2023. It is the highest rate in the country. In contrast, Mississippi approved about 660 apartment units over that same period. This is 1 percentage point for the 2023 location of approximately 1.4 million residential units.
Chas Olson, executive director of the South Dakota Housing Development Authority, said the full impact of state infrastructure funding is not yet clear as many of the supported developments are still under construction.
It is still completed this year, with about 39,000 apartments closed in March, not much different from the 41,500 in March 2024. This was the largest march since 1985.
Another obstacle to apartment building is high interest rates, making it difficult to borrow money for construction, said Danushka Nanayakkara-Skillington, assistant vice president of forecasting and analysis for the National Association of Housing Builders.
She expects apartment buildings to start to slow down until later this year.
“We’re going to be shortages of workers for a long time. That’s what it is. And of course tariffs will have an impact,” said Nanayakkara Skirnthon.
Stateline Reporter Tim Henderson can be contacted at the followingson@stateline.org.
©2025 States Newsroom. Go to stateline.org. Distributed by Tribune Content Agency, LLC.
Original issue: May 6, 2025, 12:51pm EDT
