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Housing starts collapsed in January. More snow than usual fell across parts of the country, but the seasonally adjusted data implies a continuing housing shortage ahead. Multifamily construction fell 37% from a year ago and has been one of the lowest monthly activities over the past decade. Rising apartment vacancy is not due to fewer renters but rather due to the oversupply of construction in the past three years. Developers are, therefore, pulling back, at least temporarily. Single-family home construction also fell by 5% from the prior month but remained above the key 1-million-unit mark. Ideally, single-family housing starts would be at 1.2 million, which would measurably help to relieve the housing shortage.
America greatly underproduced housing in the decade before COVID. That shortage is still lingering in the marketplace. The way to address the shortage is to incentivize construction. However, some localities are choosing the wrong policies, such as rent control, NIMBYism, and raising impact fees, which will make the shortage worst and raise housing costs in the long run.
