Affordable completions are bound to peak in 2025, but future years may not be as bountiful, according to the latest Yardi Matrix affordable housing market report.
Report Highlights:
- Affordable multifamily completions are on track to reach a multi-year record in 2025.
- Deliveries in the affordable sector are poised to taper off following 2025’s cyclical high.
- Construction starts in the affordable and broader multifamily sectors were down in 2024.
- Median construction duration was 19.2 months between 2020 and 2024.
Affordable housing shortage intensifies despite record-high deliveries
Affordable housing completions are set to reach a multi-year high of 78,377 units in 2025, up 12.6% from 2024. Despite this record, the U.S. faces a housing shortage estimated at north of 7 million affordable units. As the impact of fewer construction starts takes hold, affordable deliveries are bound to cool down reaching 64,745 units in 2026—amplifying the housing shortage.
Half a dozen markets are on track to break the 2,000 affordable unit delivery mark this year. Austin is on course to top the chart with 3,452 new affordable units followed by Los Angeles (2,752 units) and Brooklyn (2,701 units). Phoenix (2,688 units), Miami (2,037 units) and Seattle (2,018 units) round up the list.
Construction starts decreased by 28.7% year-over-year, settling at 66,000 units in 2024. The figure stood at 93,000 units in 2023 and 88,400 units in 2022. Market-rate starts fell by a steeper 46% in 2024 resulting in new affordable construction encompassing 18.8% of the total multifamily figure, up from 14.2% the year before. The index clocked in at under 10% between 2013 and 2015.
The affordable housing pipelines of 14 metros consisted of more than 1,000 units under construction. Austin led the way with 2,717 affordable units under construction, trailed by Miami (2,687 units) and Los Angeles (2,196 units). Other notable markets include Salt Lake City (1,861 units), Sacramento (1,613), San Diego (1,479 units) and San Francisco (1,462 units).
Factors inhibiting pipeline expansion
Many of the issues prohibiting affordable development affect the construction of new market-rate units as well. Among these are short-term interest rates, the rise of which increased construction financing with private debt placed in the 11% range.
The shortage of construction workers, as well as the growth of labor costs, contributed to the slowdown in deliveries. Between 2020 and 2024, the median construction duration stood at 19.2 months and 31% of projects were on time or ahead of projections, according to accounting firm CohnReznick. During the previous time slot recorded between 2015 and 2019, median construction duration clocked in at 16.1 months and 46% of developments were on time or ahead of schedule.
Read the full Yardi Matrix Affordable Housing Market Report: February 2025.
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