Already, new home construction has dropped sharply as borrowing costs climb, declining 14.4 percent in May to the lowest rate in more than a year. Early data suggest that apartment construction is also taking a hit — something industry executives can attest to.
David Wali, who runs the Boise office of the Gardner Company, a developer of residential and commercial properties throughout the mountain West, said the question of whether to build has been clouded by inflation, rising interest rates, and the continued disruption of supply chains, which has builders worried they might finish projects, be ready to rent out the units, “and be left with no appliances.”
The State of Jobs in the United States
Job gains continue to maintain their impressive run, easing worries of an economic slowdown but complicating efforts to fight inflation.
Those risks have in turn caused lenders to turn more conservative by requiring developers to put more of their own money into projects, further crimping development.
Mr. Wali has already started delaying projects, including 500 apartments in the Boise area, and he said that as the lack of new development works its way through the system in the coming months, supply will be even more squeezed. The flip side — good for him, bad for renters — is that rising rental demand has him feeling good about rent levels on apartments his company already owns.
“Those are fantastic,” he said.
The nation may be seeing a geographic shift in which rental markets are hot. Early in the pandemic, as remote work gave people geographic flexibility, places like Orlando and Tampa, Fla., and Rochester, N.Y., experienced pronounced rent growth. Now, some cities in the middle of the country are cooling, even as offices recall workers and coastal markets like New York City heat up.
“I’ve been practicing for 42 years, and I’ve never seen the huge, across-the-board demand for rent increases that I’m seeing now,” said Samuel Himmelstein, a tenants’ rights lawyer in New York City who said that clients were regularly getting in touch with him now to see if there is anything they can do about landlord demands for 20 to 30 percent higher rent.