More residential construction is occurring in low density suburbs and outlying areas because of several factors that affect housing affordability, including the continued lack of buildable lots, higher home building costs and an ongoing shortage of construction workers. These are among the key findings from the National Association of Home Builders (NAHB) Home Building Geography Index (HBGI) for the third quarter of 2024.

“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,” said NAHB Chairman Carl Harris, a custom home builder from Wichita, Kan. “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 further noted that multifamily construction across much of the nation in the third quarter of 2024 remained lower than last year. “The exception was in lower density areas, as housing affordability issues remain a key concern, and populations have increased outside of urban centers.”

“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,” said 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.”

A full 50% of the U.S. population live in counties that are in the 90th to 100th percentile when it comes to population density. This means that half of the population lives in the top 10% of the high-density areas in the nation. These high-density counties previously constituted just under 40% of single-family construction back in the first quarter of 2018. Since then, the market share for these areas has fallen to 36%.

This trend seemed to be occurring prior to the Covid pandemic, as the market share for high-density counties had fallen from 39.7% in the first quarter of 2018 to 37.8% in the first quarter of 2020. Over the next two-year period (first quarter of 2020 through the first quarter of 2022), the market share declined further to 35.5%. Single-family construction in high density areas has remined fairly constant since 2022 and stands at 35.7% in the third quarter of this year.

The third quarter HBGI shows the following market shares in single-family home building:

• 16.1% in large metro core counties
• 24.9% in large metro suburban counties
• 9.4% in large metro outlying counties
• 29.0% in small metro core counties
• 10.0% in small metro outlying areas
• 6.4% in micro counties
• 4.2% in non-metro/micro counties

Meanwhile, the share of multifamily construction in counties in the 90th to 100th percentile with regards to population density was 68.5% in the first quarter of 2018 and now stands at 63.2%. Much of this decline occurred prior to the pandemic, as the market share has remained near 64% since 2020.

The third quarter HBGI shows the following market shares in multifamily home building:

• 38.7% in large metro core counties
• 24.7% in large metro suburban counties
• 4.0% in large metro outlying counties
• 23.6% in small metro core counties
• 4.7% in small metro outlying areas
• 3.1% in micro counties
• 1.1% in non-metro/micro counties