Building Construction in Townhouses Reaches All-Time High Market Dominance
In the real estate market, a particular segment has been making waves - townhouse construction. However, the same cannot be said for the multifamily segment of the so-called "missing middle" housing types, which includes apartments in 2- to 4-unit properties. This segment has generally underperformed since the Great Recession.
These "missing middle" housing types, such as townhouses, duplexes, and small multifamily properties, have been making a comeback in recent years. In the second quarter of 2025, townhouse construction starts totaled a strong 179,000 homes over the last four quarters, marking a significant increase compared to previous years.
Contrastingly, 2- to 4-unit development accounted for only 4% of total multifamily development in the second quarter of 2025. Despite this small increase relative to the second quarter of 2024, with 5,000 construction starts for 2- to 4-unit housing units, it doesn't significantly impact the overall market share of multifamily production compared to previous years.
Meanwhile, townhouses have been dominating the single-family housing starts. In the second quarter of 2025, single-family attached starts totaled 45,000 townhouses, representing 17% of all single-family starts. Using a one-year moving average, the market share of newly-built townhouses stood at 18.3% in the second quarter of 2025. This is the highest on record for data going back to 1985.
Townhouse construction expanded more than 9% on a year-over-year basis in the second quarter of 2025. This growth is reflected in the four-quarter moving average market share of newly-built townhouses, which also hit a record high.
Dr. Robert Dietz, NAHB Chief Economist, discusses these trends at Eye on Housing, highlighting the surge in townhouse construction and the relatively stagnant growth of the multifamily missing middle segment. Despite the impressive growth in townhouse construction, it's important to note that the data does not provide information about the year-over-year growth rate or the four-quarter moving average for 2- to 4-unit construction starts.
As recently as 2000 to 2010, such home construction made up a little less than 11% of total multifamily construction. However, since the Great Recession, the multifamily segment of the missing middle has generally disappointed, while townhouse construction has been on a steady rise. This shift in the housing market is a topic of ongoing interest and discussion among economists and industry experts.
