Developers Report Continued Construction Delays

More than half are experiencing setbacks, but a few bright spots are also emerging, according to NMHC's latest survey.

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More than two months into the coronavirus outbreak in the U.S., 53 percent of multifamily developers are still reporting construction delays, according to a just-released survey from the National Multifamily Housing Council.

The figure is a slight decrease from a previous survey in April, which showed that 56 percent of developers reported experiencing construction delays in their area. Notably, of those companies affected by construction delays, 85 percent experienced delays in permitting—rising from 77 percent in the previous survey.

Seventy-eight percent of companies affected reported that starts were delayed, also an 8 percent increase from the previous survey. On the other hand, just 37 percent saw delays related to a construction moratorium, a decrease from 40 percent in the previous survey and 62 percent in the first round.

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The latest findings represent the third survey NMHC has conducted of leading multifamily construction firms since late March. The 78 responses were collected between May 11 and May 20.

In weathering the challenges caused by the pandemic, multifamily firms have been forced to adapt. According to the survey, 59 percent of respondents said they have implemented new strategies to deal with obstacles caused by the coronavirus outbreak, down from 75 percent in the previous survey.

The most popular strategies included using technology to replace in-person interactions, staggering shifts to reduce on-site exposure, and sourcing materials from alternative locations.

The proportion of developers experiencing increasing shortages of building materials is relatively low compared to those facing problems in other areas; only 29 percent of respondents in the most recent survey said that they were affected. But that also represents a 5 percent uptick from the first survey in March. Moreover, the proportion facing price increases in materials jumped to 17 percent from 4 percent in the previous survey.

A bright spot in the report was the availability of labor. Seventy percent of developers said they had not been impacted by labor shortages, a sizable improvement from 54 percent and 57 percent in the previous surveys.

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 pandemic hit, 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 begun to relax the measures over the past month.

Construction projects were allowed to resume in Michigan on May 7, in New Jersey on May 18 and in five regions of New York State on May 15 as part of a phased reopening plan. Thousands of construction projects across New York City were already operating by the end of April, after the pandemic brought some 85 percent of sites in the nation’s largest city to a standstill. Long Island, N.Y., will allow construction to restart as the region begins reopening today.

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