One US city is responsible for most of the recent apartment boom.
In 2015, the US saw a startling spike in multifamily housing starts – apartments and condos, basically – and New York City was the reason, according to Michelle Meyer and her team at Bank of America Merrill Lynch.
They edged down their projection for the number of multifamily starts in 2016 to 375,000, bringing projected total housing starts (single and multifamily combined) down to 1.175 million this year from 1.25 million.
“The downward revision to multifamily starts this year is partly a response to the past three quarters, where multifamily starts declined an average of 31% annualized following the 229% annualized gain in 2Q15,” the note from BAML said.
“This volatility largely reflected the rush to start projects in NYC before the expiration of a tax credit,” the note said. “If we subtract NYC building permits from the total, we see a more gradual weakening in building permits over the past few quarters.”
A tax break called a 421-a exemption allowed developers to get tax relief for building affordable apartments on vacant land. It expired in January, and based on the economics team’s estimation, the pressure to get projects started under the wire led to the spike.
Thus, with the exemption not renewed, the number of multifamily starts should settle in 2016.
- Bank of America Merrill Lynch