The FRED Blog has discussed the relationship between single-family housing starts and completions and also how changes in overall housing market prices are measured. Today we build on the topic of housing by comparing trends in the type of residential constructions erected.
The FRED graph above shows data from the US Census and the US Department of Housing and Urban Development (HUD) on the number of new, privately owned, completed housing units since 1968. There are three size types: single-family buildings (the blue area), buildings with 2 to 4 separate dwellings (the red area), and buildings with 5 or more dwellings (the green area).
The data are shown in a stacked area graph to highlight the relative amounts of each type of housing structure. We also changed the data frequency from monthly to annual to observe the trends more easily. So, what does the graph show?
The number of single-family structures, as a proportion of all types of housing structures, is clearly larger than the number of multifamily structures. This might reflect a preference for single-family housing, but we can’t say for sure because the data do not capture the exact number of individual dwellings in large multi-unit housing.
However, the data do show a trend in the construction of multifamily buildings with 2 to 4 units. That housing trend even has a name: the “missing middle.”
The term was coined to reflect the fact that construction of small-scale and affordable multifamily dwellings has decreased over time. “Middle” housing surged in the early 1970s during a boom in the overall construction of multifamily housing. During this period, nearly half of all new homes were multifamily. This type of housing became relatively less and less popular—as revealed by the shrinking red area in the graph.
Recent research coauthored by Raphael Bostic from the Atlanta Fed notes that small and medium multifamily properties, defined as buildings with 2 to 49 units, comprise over 20% of the US housing stock. This housing segment contains the largest percentage of the lowest-income households and the majority of rental units across the country. You can learn more about this topic here.
How this graph was created: Search the alphabetical list of FRED releases for “New Residential Construction” and select “Table 5. New Privately-Owned Housing Units Completed.” Select the three series naming the number of units per structure and click “Add to Graph.” Use the “Format” tab to change the graph type to “Area” and the stacking option to “Percent.”