The U.S. saw more new apartments completed in 2024 than in any year since 1974, but experts warn that momentum is stalling. Rising interest rates, labor shortages tied to immigration policies, and tariffs on construction materials threaten to dampen the recent surge.

According to a U.S. Census Bureau report, nearly 592,000 new apartments were completed last year — a level not seen since the 1970s, when the baby boom generation was entering adulthood and fueling a building boom. For comparison, 693,000 apartments were built in 1974, when the U.S. had roughly half the number of households it does today.

Despite the historic volume of completed apartments, construction starts have already begun to falter. As new supply floods the market, rent growth has cooled, and rising vacancy rates are cutting into developers’ profits. Analysts say tariffs on building materials and a shrinking labor pool — worsened by immigration crackdowns — are creating additional obstacles.

Apartment starts plummeted 27% in 2024 compared to the prior year and are down 37% from the 2022 peak of 531,000 starts. That marks the lowest level of new starts since 2013, even as completions remain elevated.

For years, housing experts have stressed the chronic mismatch between supply and demand, particularly in desirable locations and at affordable price points. Estimates of the national housing shortfall last year ranged widely, from 1.5 million to as many as 20.1 million homes and apartments. Since then, another 1.6 million units have been built. Most experts now place the shortage somewhere between 1.5 million and 5.5 million units, according to the Joint Center for Housing Studies at Harvard University.

State-level trends reveal striking differences. While federal data doesn’t track completions by state, building permit activity has been highest in South Dakota, Utah, Arizona, and Colorado, according to a Stateline review. On the other end, Mississippi, Wyoming, West Virginia, Rhode Island, Oklahoma, and Alaska have issued the fewest apartment permits.

The roots of the current boom stretch back to 2021 and 2022, when low interest rates and soaring rents drove a flurry of construction, said Rob Warnock, senior research associate at Apartment List.

“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,” Warnock said. He added, “Supply and demand are coming back into balance.”

As a result of the swelling supply, rents have dropped about $50 per month — a 3.5% decline — since their 2022 peak, Apartment List reported this week. Vacancy rates are now at 6.3%, the highest in 15 years, which has helped hold rents steady. But Moody’s warns in an April report that continued construction slowdowns could eventually tip the scales again.

Both Democrats and Republicans have made apartment construction a priority as the cost of single-family homes moves further out of reach for young families. In South Dakota, the Republican-led legislature launched the Housing Infrastructure Financing Program, offering $200 million in grants and loans to help cover the costs of essential infrastructure like roads and utilities in new developments.

“We have a drastic shortage of workers,” South Dakota Republican state Sen. Casey Crabtree said ahead of the program’s approval in 2023. “South Dakota businesses need more workers in our state. To get more workers, we need more housing.”

Meanwhile, Armand Domalewski, co-founder of YIMBY Democrats for America, argues that excessive local regulations often stymie housing development, particularly in blue states.

“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 said. Local resistance can also be a barrier, he added.

“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 said.

California’s 2021 HOME Act was designed to promote affordable housing and address labor shortages, but local pushback has slowed progress. In late 2024, Democratic Gov. Gavin Newsom signed several measures aimed at streamlining permitting and curbing local opposition to the 2021 law.

South Dakota issued nearly 6,000 permits for new apartments in 2023 and 2024 — a potential 1.4% increase over its 2023 total of 417,000 housing units, the highest rate in the country. In contrast, Mississippi approved just 660 units in that same period, barely nudging its 2023 base of 1.4 million housing units.

Chas Olson, executive director of the South Dakota Housing Development Authority, noted that the full effects of the state’s infrastructure funding have yet to materialize, as many subsidized projects are still under construction.

So far, the pace of completions remains brisk. Roughly 39,000 apartments were finished in March 2025, only slightly below the 41,500 completed in March 2024 — the biggest March figure since 1985.

But high borrowing costs continue to pose challenges, said Danushka Nanayakkara-Skillington, assistant vice president for forecasting and analysis at the National Association of Home Builders.

“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, predicting that new apartment starts will remain sluggish until later this year.

For questions or further details, contact Stateline reporter Tim Henderson at thenderson@stateline.org.

Originally reported by Tim Henderson in News From The States.