Nashville’s Multifamily Construction Pipeline at Lowest Level Since 2021

More Buildings Open Their Doors While Construction Starts Reach a Four-Year Low in Tennessee Capital

According to Blaise Tomazic at CoStar Analytics, "Apartment construction in Nashville, Tennessee, is starting to slow after years of record development.

At the end of the first quarter, the construction pipeline was just over 20,000 units, a decline of 27% from the record at the end of 2022.

Since 2020, Nashville's population increased by 4%, or an addition of nearly 81,000 people. This growth made Nashville the eighth fastest-growing metropolitan statistical area, on par with Phoenix and just behind Houston.

This strong population growth caught the eye of developers, who responded with record development. In 2023, 12,500 units opened, a record for the market. This year, Nashville is projected to add another 11,700 units, which would be second only to last year.

This wave of supply has pushed the market’s vacancy rate up by 4.3 percentage points since the start of 2020 to 11.9%. It is the third-highest increase in the country among the 40 largest multifamily markets by number of units, behind Austin and Raleigh.

Downtown Nashville has seen the biggest share of development. At the end of the first quarter, the area has just over 9,900 units in development, 47% of the market’s total. Downtown has had its inventory grow by almost 75% since 2020 and, as a result, its vacancy rate is up to 16.3% while rent growth has slowed to negative 3.4 % from the prior year. However, renter demand has remained as annual absorption — or the change in occupancy over a given time period — in the first quarter reached 3,300 units, the highest level since 2018.

As borrowing costs have risen and rent growth has slowed over the past two years, construction starts have declined. In 2023, 6,800 units broke ground, the lowest level since 2019 and 57% below the record in 2022. A smaller construction pipeline would benefit the market in 2025 and beyond as Nashville’s vacancy rate is forecast to remain near its current level of around 12% until the middle of next year before declining."

The slowdown in apartment construction in Nashville, Tennessee, following years of record development could have significant implications for property taxpayers, particularly as it relates to the 2025 Davidson County revaluation.

Firstly, the decline in construction activity may lead to a decrease in new property assessments. With fewer new developments entering the market, there may be a reduced supply of newly assessed properties, which could limit the growth of the property tax base. This could potentially alleviate some of the upward pressure on property tax bills that may have been driven by rapid development and increasing property values in previous years.

However, the impact of the construction slowdown on property tax bills may be tempered by other factors. Despite the slowdown, Nashville has experienced robust population growth, which has likely increased demand for housing. While the pace of new construction may be slowing, the demand for existing housing stock could remain strong, supporting property values and, consequently, property tax assessments.

Furthermore, the 2025 Davidson County revaluation could have a significant impact on property tax bills for Nashville residents. Revaluations typically involve reassessing the value of properties for tax purposes to ensure that they reflect current market conditions. Given the recent trends in the housing market, including the slowdown in construction and changes in vacancy rates and rent growth, property values may have shifted since the last revaluation.

As a result, the 2025 revaluation could lead to substantial changes in property tax assessments, potentially causing values to skyrocket for some properties. Areas that have seen significant development and gentrification in recent years, such as downtown Nashville, may experience particularly pronounced increases in property values and, consequently, property tax bills.

Overall, while the slowdown in apartment construction may have some impact on property tax bills in Nashville, the full extent of the effects will likely depend on a variety of factors, including changes in property values resulting from the 2025 Davidson County revaluation.