Market Demand Drives Increase in Multifamily Building Permits in New Jersey

February 20th, 2013 by Tim Evans

After several years in the doldrums of a recession, the homebuilding industry is finally beginning to show some signs of recovery. According to an analysis by Bergen County’s The Record of Census Bureau building permit data, 2012 was “the busiest year for housing construction since 2008,” with permit activity increasing by a third as compared to 2011.

What is particularly remarkable about the recovery is that it is being driven by construction of multifamily housing. According to The Record, 58 percent of building permits issued in 2012 were for multifamily housing – the largest multifamily share on record since data collection began in 1980.

What’s more, this 58 percent figure actually understates the popularity of multifamily housing, because of the way the Census Bureau tabulates building permits: in the Census Bureau data, a single permit can cover an entire multifamily structure, regardless of how many individual living units the structure contains. Thus the number of multifamily permits understates the number of actual multifamily units.

This recent dramatic rise of multifamily housing as a driver of building permits is actually a continuation and intensification of a pattern New Jersey Future has already studied (PDF). That report, published in 2010, noted that permits for multifamily housing made up a much larger percentage of total building permit activity in the 2000s than in the 1990s, accounting for only 13 percent of total building permits from 1990 to 1999 but increasing to 30 percent for the 2000-2009 period.

And this increase was not just due to a resurgence in building activity in the state’s urban centers – the usual suspects when it comes to multifamily housing. It was also attributable to the fact that the issuance of multifamily permits became much more geographically widespread, with fully half of the state’s municipalities issuing at least one multifamily permit between 2000 and 2009, compared to only a third of municipalities issuing any between 1990 and 1999. New multi-family housing was welcomed into many more communities in the 2000s than had been the case in the 1990s.

The trend is likely to continue, with the Millennial generation – now into its prime household-formation years – expressing a preference for city living and more urban amenities (like proximity to public transportation) and eschewing homeownership, especially the kinds of houses they grew up in.