Construction Delays Continue for Multifamily Developers

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Four months into the COVID-19 pandemic, developers of multifamily properties continue to experience delays in construction starts and permitting, according to a report from the National Multifamily Housing Council.

In the multifamily trade organization’s recurring COVID-19 Construction Survey, 57 percent of developer respondents said they had experienced construction delays in the markets where they operate. Among those reporting delays, 83 percent said permitting delays were an issue, while 71 percent reported a “significant” pause in construction starts, according to the report. The survey was taken between July 6 and July 15 and received 61 responses from multifamily construction firms.

The survey was first conducted between March 27 and April 1 of this year, following nationwide shutdown orders due to the coronavirus outbreak. The figures in this most recent report, the fourth edition, reflect similar numbers from the last edition of the report, which found that 56 percent of developers experienced construction delays and 85 percent experienced delays in permitting.

Of those reporting delays in construction starts, 56 percent said they were due to permitting, entitlement and professional services. The second-most common response given, at 52 percent, was economic uncertainty, followed by availability of construction financing, health and safety concerns and projects that are not economically feasible at this time, according to the report. Other causes reported by respondents were delays in materials and crewmembers testing positive for coronavirus.

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Half of respondents estimated that delays in starts would last less than six months, while 44 percent estimated a duration of 6 to 12 months. Half of respondents also said that the recent spike in new coronavirus cases had impacted their operations in affected markets.

The availability of labor, which had improved significantly in the third edition of the report, fell back into figures seen in earlier reports, with 39 percent of respondents reporting being impacted by the availability of labor, a jump from 25 percent in the previous report.

The multifamily market had an estimated pipeline of 300,000 units set to open by the end of 2020, but the fallout from the coronavirus pandemic may likely cut that number to 250,000 units, according to a recent report from Marcus & Millichap and REIS.

Temporary bans on construction projects deemed nonessential threw a wrench into development in certain states when the coronavirus outbreak hit in March, adding to the impact of permitting delays and, to a lesser extent, materials shortages and on-site social distancing measures. New York, New Jersey and Michigan were the last states to restrict nonessential construction, but all three states have allowed construction to resume over the last two months.