Hartford Business Journal

6 HARTFORDBUSINESS.COM | JANUARY 31, 2022 Deal Watch Multifamily building permit activity slows Here's a look at homebuilding permit activity in Connecticut from January through November of the last three years. Year Permits Single-family Multifamily (5 or more units) 2021 2,835 1,308 2020 2,371 2,613 2019 2,440 2,679 Source: Estimates by U.S. Census Bureau based on representative sampling of permitting places. Apartment developers, homebuilders feel global supply chain pains, but 'good' projects still move forward By Michael Puffer mpuffer@hartfordbusiness.com E ric A. Santini, a principal in Vernon-based Santini Homes, hopes soaring building material costs moderate later this year so he can launch a 240-apartment project currently moving through local approvals in Tolland. "If we got the approvals last year at this time, with the way things are, I'm not sure we would start," Santini said. "We would probably do a little bit of a wait and see. We are hoping the supply chain will start to work itself out this year. I think every multifamily developer is starting to give a pause." COVID-related production slowdowns and snarls in the global supply chain have delayed building projects, added costs and increased risk. There is disagreement among some Connecticut residential developers — both apartment and single-family homebuilders — as to the impact on project volume. Santini said developers who have launched projects are finishing them. But he expects some will hold off on new ventures, waiting to see if supply chain problems ease in 2022. "It's hard to determine what the margin is going to be when prices are changing so frequently in the construction process," Santini said. "On the multifamily side, I don't know anyone starting a new project right now given this environment." Some industry experts believe builders are willing, and able, to roll with the punches given continued robust housing demand. The number of permits issued for single-family houses in Connecticut has continued a steady rise over the past three years, according to estimates by the U.S. Census Bureau. However, permits for multifamily developments in Connecticut fell sharply year-over-year, according to Census data. At the end of November, Connecticut builders pulled permits for 1,308 housing units in multifamily developments (five or more units) during 2021. That's roughly half the 2,613 multifamily units permitted in the same period for 2020, according to Census estimates. In the same 11-month period of 2019, builders pulled permits for 2,679 multifamily units in Connecticut. Last year's sudden shift downward, however, didn't occur nationwide. Permits for multifamily housing of five or more units were up 26.4% nationally in 2021, according to the Census. Dealing with headaches Michael Freimuth, executive director of the Capital Region Development Authority, said he's seen no hint of slacking interest in multifamily development in Hartford, even as supply chain difficulties have brought challenges. He mused any drop in multifamily development is likely attributable to interruption in the pre-development planning and vetting processes during the COVID-19 lockdowns of 2020. Still, Freimuth described supply chain problems as "increasingly brutal," hitting developers on multiple fronts. "One is price, of course," said Freimuth, whose agency is helping finance hundreds of new Hartford apartments currently under construction and set to debut this year, including 270 units in the first phase of the North Crossing development near Dunkin' Donuts Park. "Two is time, which is money, extending the time it takes to build a project, which increases its cost. Third is predictability, risk analysis. If you don't know when, or if, or at what price, it's kind of hard to sift through the pieces and see if the deal makes sense." So far, developers have proven adaptable and willing to put up with headaches, Freimuth said. Material costs rising Meanwhile, homebuilder confidence slipped slightly in December following three months of increases, according to an analysis by the National Association of Home Builders (NAHB) and Wells Fargo. The NAHB attributes the slip to growing inflation concerns and ongoing supply chain disruptions. "Higher material costs and lack of availability are adding weeks to typical single-family construction Mark Lovley (left) and Anthony Valenti, partners in Newport Realty Group, in front of the first building of what will become the 76-apartment, mixed-use "Steele Center" development near Berlin's passenger rail station. Eric Santini HBJ PHOTO | STEVE LASCHEVER

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