The pipeline for multifamily housing in Virginia is robust. Multifamily building permit activity around the state expanded rapidly in 2021 to its highest level in decades. Driven by surging rents, low vacancy rates, and increasing demand in the state’s urban and suburban markets, builders are poised to get shovels in the ground. But will the multifamily building boom be dampened by chronic labor shortages, material shortages, and soaring construction costs?

Multifamily building permit activity in Virginia in 2021 was the strongest it’s been in more than 30 years. Statewide there were 13,612 building permits issued for multifamily residential units in buildings with five or more units in 2021. This is the highest level of permit activity for multifamily housing in Virginia since 1989. Last year’s permit spike even surpassed the levels seen during the housing boom in the early 2000s. As prices soared and inventory dried up in the for-sale market over the last couple years, many would-be buyers are opting to rent instead, which is putting upward pressure on rents and creating an increasingly competitive rental housing market in Virginia and beyond. Despite these ripe market conditions, builders are still struggling with a wide range of challenges. The construction labor shortage continues to be a huge obstacle, as many construction workers are retiring, and a slowdown in the immigration process has exacerbated the shortage. Even if builders can find enough labor, material shortages caused by supply-chain disruptions and rising material costs are likely to make it challenging to turn these permits into occupied units.

After a major slowdown in 2020, the state’s urban and suburban markets see a surge in multifamily building permits in 2021. Rental markets all around Virginia are red hot, though just a handful of localities had a major jump in multifamily permit activity last year because of this demand. By far the largest spike was in Arlington County, where multifamily permit activity accelerated from just 257 permits issued in 2020 to 3,097 permits issued in 2021, a 12-fold increase. Chesterfield County in the Richmond suburbs also had a major surge in multifamily permits. There were 1,465 permits issued for multifamily buildings with five or more units in 2021 in Chesterfield County, more than double the number of permits issued in 2020. Prince William County in the Northern Virginia suburbs had an influx of 779 multifamily permits in 2021. In 2020, there were fewer than 100 multifamily permits issued in the Prince William County market. As upward pressure on rents continues, it is likely that communities with a relatively large share of multifamily housing will continue to see additional projects come into the pipeline in the coming months. But it remains to be seen how many of the projects can get built in a typical construction time frame, and whether the barriers facing the industry will slow down this potential multifamily housing boom that is underway in Virginia.

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