Connecticut’s real estate market remained red-hot throughout 2021, but new housing permits largely favored single-family homes over multi-family units, according to a report by Nandika Prakash, Ph.D, published by the Connecticut Economic Digest.
The pandemic led to a wave of New Yorkers exiting denser population areas in and around the city and buying up real estate across the border in Connecticut, driving up sale prices, which continued into 2021, according to the report.
But building new homes to meet increased demand slid 15 percent in 2021, driven in large part by less permitting of multi-family housing. The term multi-family is defined as having five units or more in this report, which is based on Census Bureau data.
“The decrease was driven by 45 percent fewer permits for multi-family housing compared to 2020 levels; permits for single family structures increased by 17 percent over 2020, perhaps reflecting changing living preferences,” Prakash wrote.
Sixty-three percent of housing permits in 2021 were for single-family homes, “the highest share in ten years,” Prakash wrote, adding that the decreased level of multi-family housing permits broke a “recent trend of higher production of multi-family housing.”
The decrease in multi-family home permits came during a year when the Connecticut legislature addressed local zoning issues, which have become a contentious debate at the capitol.
Zoning reform advocates argue Connecticut’s local zoning laws prevent affordable housing, particularly multi-family units, from being constructed to make housing more accessible, while opponents argue that a top-down approach to local zoning issues usurps local control.
Legislation passed during the 2021 session allowed as-of-right accessory dwelling units such as in-law apartments to be added to single-family homes, prevented municipalities from imposing caps on multi-family housing, restricted parking requirements for multi-family housing, and disallowed “town character” as a reason to deny a housing project.
The decrease in housing permits over 2021 appears to be continuing into 2022, according to the report, with the added effect of driving up home values on the market. Connecticut’s median home prices increased in 2021 by more than 15 percent, pushing single-family homes to an average median sale price of $385,000.
The trend toward more single-family home permits has also continued, with 58 percent of new housing permits going to single-family homes and 38 percent toward multi-family construction, according to the report.
However, Alexis Harrison of CT 169 Strong, an organization that pushed back against zoning changes at the capitol, cautioned using year-to-year statistics when discussing home construction rates during COVID, as Gov. Ned Lamont issued an executive order suspending the expiration of housing permits during that time.
“This is indicative of the many disruptions that were existing in the construction trades during the 2020-2021 period,” Harrison wrote in an email. “Therefore, we would caution comparing year-to-year statistics over this very unusual period.”
Prakash also noted that escalating home prices in Connecticut and decreased supply could be caused by pandemic disruptions.
“New home construction nationwide has been hindered by labor shortages, supply-chain disruptions, inflation, and land shortages driven by zoning restrictions and land regulations,” Prakash wrote.
The price of lumber soared during the pandemic to record levels but has since fallen more than 50 percent, and the housing market is showing signs of slowing down. Increasing interest rates may also hinder home purchases and new home construction.
“Millennials now make up the largest share of homebuyers,” Prakash wrote. “This population is raising families while paying off student debt, and higher prices along with rising mortgage rates may lead to their postponing homeownership if they deem it unaffordable.”
New Haven, Milford and Darien issued the most multifamily permits and Southington, Bristol and Greenwich issued the most single-family permits.
