Factors affecting housing affordability are causing more residential construction to occur in low density suburbs and outlying areas, according to the third quarter NAHB Home Building Geography Index (HBGI).
The shortage of buildable lots, higher home building costs, and the construction labor shortage are among the factors pushing construction activity further into the suburbs.
“The trend of construction expansion in lower density areas occurred prior to and during the COVID pandemic, as many households chose to move out of areas where population density was highest to take advantage of additional telecommuting flexibility and the ability to purchase larger homes in areas of the country where housing is more affordable,” says NAHB chairman Carl Harris. “Single-family construction did continue to show growth across most HBGI geographic areas in the third quarter, albeit at a slower rate than compared to the same time period last year, even as mortgage rates remained high.”
Harris said multifamily construction remained lower than a year ago across much of the country in the third quarter of 2024.
“Regulations and NIMBY policies create significant headwinds for builders to construct affordable housing in urban centers, which has created this shift in residential construction to low density areas,” NAHB chief economist Robert Dietz. “Policymakers at all levels of government need to eliminate excessive regulations, ease permitting roadblocks, and promote careers in the skilled trades to allow builders to construct more homes and apartments across the nation.”
Approximately 50% of the U.S. population live in counties that are in the 90th to 100th percentile for population density. As a result, this means that half the population lives in the top 10% of high-density areas in the nation, according to the NAHB. These high-density counties previously accounted for 40% of single-family construction as recently as 2018; since then, the market share in these areas has fallen to 36%.
According to the third quarter HBGI, large metro suburban counties account for 24.9% of single-family home building activity, small metro core counties account for 29.0% of home building activity, and small metro outlying areas account for 10.0% of home building activity.
The share of multifamily construction in counties in the 90th to 100th percentile for population density was 68.5% in the first quarter of 2018; currently the share is 63.2%. Most of the decline occurred prior to the pandemic, according to the NAHB.
