Miami is no stranger to construction surges. But the current apartment development wave is quite different from anything the metropolitan area has seen in the past. Miami made a sharp turn toward apartment living, and away from building single-family homes, back in 2009. Unlike most other major cities though, Miami never rediscovered an affinity for houses.
Close to 16,000 apartments are currently under construction in greater Miami, putting it on course for a 10% inventory rise. This construction wave is the largest on record and puts Miami among the leading markets for U.S. apartment developers.
The construction surge comes on the back of a booming economy and population growth. Metropolitan Miami's unemployment rate is at a historic low of 3%, and the population has grown by close to a half-million people over the past decade.
An examination of Miami area building permits reveals that 2009 was a defining moment for housing development in Miami, as it was in many cities, because of the credit crisis. Building permits declined dramatically. Apartment unit permits fell by 35,000 from the 2005 high to its low in 2009. Single-home permits declined by just over 24,000 over the same time.
What distinguishes Miami from most other large cities, though, is that when developers went back to work in earnest, which was 2012 in the Miami metropolitan area, demand made a sharp turn toward apartments and away from single-family homes. To this day, apartment permits are the only ones to have recovered in a meaningful way in the market.
Last year was the strongest year since the credit crisis for apartment construction in the region. About 25,500 more apartment permits were issued in 2018 than in 2009. Single-family home permits increased by a mere 5,000 over the same time.
And there is no indication that this trend is reversing. In fact, the gap between the two types of housing permits has been widening every year since 2009. In 2018, apartments accounted for over 80% of total construction permits issued.
Demographics, home affordability, taxes and congestion are just some of the reasons behind the turn toward apartment living. But these drivers are largely disassociated from short-term economic cycles, making the shift towards apartment living a structural long-term trend.
And this trend, while more pronounced in Miami, is playing out in other large markets across the country.
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