In this housing recovery, we’ve seen single-family home construction lag the boom in multi-family (apartment) building construction.
This has been driven America’s shifting preference toward renting over buying.
This of course has implications on the economy at large.
“Building a new single-family home adds more to the economy than the recent alternatives of building apartments or remodeling,” writes Maury Harris at UBS.
According to Harris, each single-family home adds about 3 jobs, and that is about 2.5 times the jobs that an apartment unit in a multi-family apartment building creates.
“The absolute job formation associated with likely home and apartment building this year is not trivial,” writes Harris. “Using job creation multipliers provided by the National Association of Home Builders, last year, the 618,000 single-family starts created 1,806,000 jobs and 307,000 multifamily starts created 347,000 jobs for a total of 2,153,000 jobs. “
“For 2014, our 625,000 estimate for single-family starts would require 1,856,000 jobs and the projected 425,000 in multifamily starts would generate 480,000 jobs for a total of 2,336,000 jobs. The 183,000 difference between 2013 and 2014 housing-related job formation is equivalent to adding around 15,000 jobs per month to nonfarm payroll growth.”
Multi-family housing starts already account for a third of homebuilding, writes Paul Diggle at Capital Economics. For now, with rental demand slated to stay strong in coming years, it looks like multi-family homebuilding will continue to “dominate the recovery in starts.”
While the contribution is not nothing, the trend towards multifamily means fewer jobs will be created than if we were to see a stronger recovery in single-family starts.