Are There Too Many Apartment Developers in the Mountain West?
With apartment vacancies above 10% and rents declining, our TDC team spends a lot of time peering into our crystal ball trying to predict when the multifamily market will recover. Recent events continue to cloud our view: a complete reversal on US immigration policy, slowing birthrates, affordability issues, higher oil prices from the Iran conflict, and tariff uncertainty. (At least the Jazz landed the 2nd pick in the NBA draft!)
We’ve already blown past “survive till ’25.” Yet every week, a developer tells us the same story: nothing is being built today, so in 2 or so years, their project will be the lone delivery in a tightened market. After hearing this repeatedly—and seeing the ongoing cranes and construction crews on our I-15 commute home—we’re starting to wonder if the soft apartment market will ever tighten.
The COVID Boom and Lessons From the GFC
All this ongoing construction has us asking: did the post-COVID boom create too many developers? One thing about developers is… they develop. It’s their job to acquire land and build housing. We have massive respect for what they do, but the skillset isn’t exactly transferrable to OpenAI or Anthropic. It’s a ‘Build-or-Die’ career. And despite the soft market, they keep building.
There are echoes of the build-up to the Great Financial Crisis: the massive developer capacity that exploded in the late 2000s. The US Census Bureau tracks “Merchant Building” companies (NAICS 236117) that build and sell single and multifamily housing. Between 2003 and 2006, the number of employees nearly doubled and firms more than tripled across the U.S.
Yet actual housing completions only increased from 1.7 million to 2.0 million over the same period. In 2003, there were 153 housing units completed per firm; by 2006, that had dropped to 59. The industry had capacity to build 3x more houses than it was producing. That excess capacity took time to right-size and homes continued to be built at an unsustainable (albeit lower) rate over the next several years before finally bottoming out in 2011.
How Does Today Compare?
We’re not predicting another crash. But the GFC time period offers a useful benchmark. While firm counts mentioned earlier are volatile due to consolidation, employee counts provide a more stable measure.
The data shows that ~7 completions per employee is a floor—below that, layoffs begin. At ~10 completions per employee, companies start hiring.
Payrolls tell an even clearer story. Adjusted for inflation, payroll per housing completion has stayed relatively steady. As margins decline or demand softens, companies adjust payroll quickly to stay solvent.
Nationally, the situation looks balanced. Completions maintained a steady pace in 2024 and 2025 suggesting the industry can adjust to softer demand within existing capacity. If payrolls or employee counts were too high relative to completions as they were in 2007, we’d be more concerned about overbuilding.
Utah’s Situation
However, real estate is market-by-market. The Census Bureau doesn’t provide state-level completion data, but we can use permits as a proxy.
Utah shows a similar pattern: dropping below ~9 permits per employee signals overcapacity. During the GFC, the industry laid off nearly 2/3 of the workforce after 2007. As demand returned, permits per worker rose above ~12—the expansion threshold.
Payrolls confirm the story. In Utah, up to $5,000 per permit appears healthy. Above that raises capacity concerns.
Utah’s recent expansion has been more pronounced than the national trend. Payrolls are 3x higher than post-GFC levels, and employee counts are 2x higher. The concern lies in the 2023 data: as the market normalized from the COVID boom, payrolls and employee counts appear too high for current permit activity. We’re already seeing this play out on the ground as many developers, especially in multifamily, have cut staff to right-size.
Key Takeaways:
1. Nationally, housing development capacity appears in equilibrium with demand. Risk of a major correction looks minimal.2. In Utah, the housing development industry likely has excess capacity from the COVID boom.3. This excess capacity means projects keep getting proposed and built despite high vacancies.4. We expect excess capacity will take time to right-size as companies downsize and marginal players exit. The multifamily recovery in Utah and similar markets will probably take longer than current market consensus.Build-and-hold developers and those who can pivot to for-sale residential should weather this. But pure multifamily merchant developers with limited asset management income will struggle. We’re already seeing marginal players downsize while developers with clear competitive advantages continue to perform. Survival of the fittest.
Ben Walker, CFA
Taylor Derrick Capital
