The U.S. saw more new apartments built in 2024 than in any year since 1974, with South Dakota emerging as the leader in approving new housing units. Yet experts warn that the construction surge may slow, facing challenges from tariffs, rising interest rates, and labor shortages exacerbated by immigration policies.

A recent U.S. Census Bureau survey reported nearly 592,000 new apartments completed in 2024, marking the highest annual total since the 1970s housing boom, when baby boomers entered the housing market in droves. By comparison, the nation built 693,000 apartments in 1974, despite having half the number of households as today.

However, the record-setting completions have been accompanied by a 27% drop in apartment starts in 2024 compared to 2023, and a 37% decline from the 2022 peak of 531,000 units, raising concerns about the sustainability of the momentum. Industry observers cite lower rents, higher vacancy rates, material tariffs, and a shrinking construction workforce as key factors contributing to the slowdown.

“Those new apartments came online in 2023 and 2024, and while those deliveries are slowing down today, there are still many apartments in the pipeline,” said Rob Warnock, senior research associate for Apartment List. He added, “Supply and demand are coming back into balance.”

According to a recent Apartment List report, national rents have fallen by about $50 per month (3.5%) from their 2022 peak, while vacancy rates have climbed to a 15-year high of 6.3%, putting downward pressure on rents. However, analysts at Moody’s warn that a slowdown in new construction could reverse this trend in the coming years.

State-level data analyzed by Stateline shows that South Dakota, Utah, Arizona, and Colorado have led the nation in approving new apartment permits in recent years. In contrast, states like Mississippi, Wyoming, West Virginia, Rhode Island, Oklahoma, and Alaska have lagged far behind.

In South Dakota, state leaders have worked proactively to encourage apartment construction. The Housing Infrastructure Financing Program, launched in 2023, committed $200 million in state and federal funds to offset infrastructure costs for new housing developments. The initiative has provided grants and loans to cover essentials such as roads, sewer lines, and lighting, helping developers break ground on new projects.

Republican state Sen. Casey Crabtree, the sponsor of the legislation, emphasized its importance in addressing housing shortages across the state. “We have a drastic shortage of workers,” Crabtree said before the 2023 vote. “South Dakota businesses need more workers in our state. To get more workers, we need more housing.”

Between 2023 and 2024, South Dakota approved nearly 6,000 permits for apartment units, representing a 1.4% increase over the state’s 2023 total of 417,000 housing units—the highest percentage gain in the country. Meanwhile, Mississippi approved only about 660 apartment units during the same period, barely moving the needle on its existing housing stock.

While South Dakota’s progress stands out, challenges loom nationwide. Danushka Nanayakkara-Skillington, assistant vice president for forecasting and analysis at the National Association of Home Builders, warned that the sector faces multiple hurdles. “We are going to be short of workers for a long time. That’s the way it is. And of course tariffs are going to have an impact,” she said, citing labor constraints and the cost of imported materials.

Additional barriers include high interest rates that make it costlier for developers to borrow and build. Experts like Armand Domalewski, co-founder of YIMBY Democrats for America, say local regulations and community opposition further limit development in high-demand regions. “A lot of blue-government areas and cities have extremely restrictive zoning, impact fees and other rules that make it very difficult to build housing,” Domalewski noted. “If it was just a free market, developers would want to build in the places like California, where prices are the highest and rents are the highest, because they’d make more money,” he added.

In California, efforts to spur development have faced pushback despite legislative reforms. The 2021 HOME Act aimed to boost affordable housing and address labor shortages, yet some municipalities have resisted its implementation. In response, Gov. Gavin Newsom signed several measures last year to streamline approval processes and counteract local opposition.

For now, completions remain robust. The U.S. finished 39,000 apartments in March 2025, close to the 41,500 completions in March 2024, the strongest March figure since 1985. Yet the consensus among economists and developers is that further declines in starts are likely throughout 2025, signaling a slowdown in new supply ahead.

“We’re seeing a shift from boom to caution,” Warnock said. “But the need for housing hasn’t gone away—it’s just becoming harder to build.”

Originally reported by Tim Henderson in The Brookings Register.