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By Omar Mohammed
Reporter, Economy & Finance
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Austin, Texas, has seen the nation's biggest drop in permits to build multifamily homes as demand has waned partly because residents are finding it difficult to afford rent that soared at the height of the COVID-19 pandemic.
This year, the city has seen builders secure 21 permits per 10,000, almost half of the average it recorded between 2021 to 2023, according to real estate platform Redfin. The decline is part of a national trend in which building permits plunged 30 percent during the same time period.
Builders are pulling back after escalating construction during the COVID years, especially in the South and the Sunbelt. Americans moved to these parts of the country in search of cheaper housing after stay-at-home orders instituted to slow the spread of the virus gave workers the flexibility to work anywhere in the country.
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That migration is slowing as employers increasingly demand their workers return to the office. This, in turn, has led to cooling demand for rental properties, which make up the bulk of multifamily construction.
But builders are also struggling with high costs of construction, according to Redfin.
"Elevated interest rates have made it more expensive to borrow money for construction projects," Redfin's analysis pointed out. "There's already a near-record number of new multifamily units hitting the market due to a building boom in recent years, making it difficult for some property owners to find tenants."
Despite Austin's building boom slowing, the Texas capital is still one of the leading cities where builders are securing permits, behind only Cape Coral, Florida.
But as those properties are set to hit the market, Austin has seen rent decline substantially, with asking prices down 7 percent in May.
"The third-steepest decline among the metros for which Redfin has rent-price data," the real estate platform said.
Part of the reason rent in Austin and other parts of the country is falling is the large number of developments hitting the market, flooding the rental space with options. Housing economists warn, though, that builders pulling back could slow supply and limit the fall in rent prices as a result.
"Prospective renters should be aware that now may be a better time to sign a lease than later," Sheharyar Bokhari, Redfin's senior economist, said in the analysis. "Property owners might start jacking up rents again once all of the new apartments hitting the market fill up with tenants and there's no longer so much supply, which could be the case in a year or two."
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