Low inventory continues to be a concern for Virginia’s housing market. As current homeowners choose to live in their houses for longer, an increase in the supply of housing units hinges more upon the construction of new homes. However, the latest data shows that building permits for new housing units have slowed down in April 2023. Similar to data at the national level, multifamily housing permits in Virginia, particularly, have gone down in April 2023 compared to the year before.
Multifamily housing activity reached record high levels in 2021 due to a rise in demand for rental units. The higher multifamily permit numbers in 2021 and 2022 were likely a direct result of that, as builders sought to capitalize on the multifamily housing demand. In 2023, the number of permits for new multifamily housing fell as the momentum in multifamily housing demand has shown signs of cooling down.
Furthermore, in most metro areas of Virginia, the number of permits for new multifamily housing construction was lower in the period from January through April 2023 than in the same time frame in 2022. The year-to-date number of permits was down 25% in the Washington, D.C. metro area at 3,437 permits, and down 12% in the Richmond metro area at 1,870 permits. These two metro areas have had the highest multifamily housing activity in Virginia, historically. On the other hand, the number of multifamily housing permits was up in the Roanoke, Staunton, and Harrisonburg metro areas.
It remains to be seen whether this slowdown in multifamily housing permits is a result of decreasing rental market demand or a consequence of the declining confidence in the current state of the economy. Moreover, it will be important to track any potential consequences on rental prices as well as any spillover effects on the single-family housing market in Virginia.