The U.S. is in the midst of a surge in new apartment construction. Between 2020 and 2022, over 1.2 million new apartment buildings were completed across the U.S. – the highest number of new units delivered in recent memory. The recent jump in new units pushed the national rental vacancy rate up to 6.6% in the first quarter of 2024, contributing to the recent pause in rent growth.
How do new units fit into the big picture of affordable housing? Local governments might want a clearer view of who’s actually moving into these new apartments when setting their housing goals. For example, are these units attracting singles or families? How do the costs stack up against existing rentals? And which parts of the workforce tend to sign new leases in these apartments? Getting answers to these questions could help local officials prioritize housing for those who aren’t being served by the latest developments.
To scratch the surface on some of these questions we can look at individual level survey responses to the most recent 2022 American Community Survey.
This analysis compares new apartment buildings with 5+ units built between 2020 and 2022 with the rest of the rental housing stock (including single-family homes and townhomes).
It’s important to note that the demographics, incomes, and other characteristics of renters living in new apartments may look different for each housing market. To control for that, I’ve analyze approximately 12,000 responses across 106 PUMAs (mapped below) where new multifamily units built between 2020 and 2022 make up at least 5% of the rental housing stock.
Who moves into new apartment buildings?
New supply tends to meet the needs of smaller households. Nearly 4 in 5 apartments built between 2020 and 2022 had one or two bedrooms and less than 8% had three or more bedrooms. Nearly a third of older rental housing stock (which includes single family homes and townhomes) have three or more bedrooms and may provide better housing options for families or larger households. About 54% of new multifamily units are rented by people living alone, compared to 38% of older rental units. However, half of older rental units are inhabited by families, compared to only 32% of new multifamily units.
Renters living in new apartments also tend to be younger than renters living in older rental units. Apartment renters are about 9 years younger on average, and 60% of new multifamily units are rented by households 35 or younger, compared to 40% among the rest of the rental housing stock.
New apartment renters typically have incomes that are 4-5% higher than those renting older units in the same market. This is likely due to the significant rent differences between units built after 2020 and older ones. New apartments charge 20-30% higher rents than older units, which partially reflects the recent surge in construction costs and are still 40% above pre-2020 levels.
