“In the long-run, boosting the availability of affordable new construction, both for-sale and for-rent, remains the key to improving the cost of housing.”
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Multifamily Offers a Brighter Spot in a Weakening Construction Market
Article originally posted on Globe St on Oct 21 2026
Falling housing starts are narrowing the new-supply pipeline, but September’s construction figures offer a more mixed picture for apartment investors. Multifamily permits and completions rose from August even as starts declined—a divergence that the National Apartment Association says could reflect stronger conditions in some local markets despite a national slowdown.
The tension extends beyond construction. High financing costs are keeping homeownership out of reach for some households, leaving rentals as an alternative. Yet the same pressures weighing on buyers, along with rising material costs and labor constraints, are making it harder for builders to deliver the housing needed to improve affordability.
Multifamily Shows Pockets Of Strength
U.S. housing starts fell 5.2% from August to a seasonally adjusted annual rate of 1.22 million units in September, according to Census Bureau figures highlighted in NAA’s October construction analysis. Starts were down 7.4% from a year earlier.
Both single-family and multifamily starts declined month over month. NAA says lower activity in buildings with five or more units drove the year-over-year decline in total starts.
Multifamily permits and completions, however, increased from August. NAA’s analysis suggests those gains could signal that construction companies are responding to stronger conditions in some local markets, even as national activity weakens.
Across all housing types, permits slipped 0.2% from August and 3% from a year earlier. Completions rose 2.2% month over month but remained 14% below September 2025 levels.
Costs And Financing Squeeze Builders
The uneven construction figures come as builders face pressure on both development costs and demand.
“Home builders find themselves between a rock and a hard place, squeezed by tariffs on imports pushing cost of materials higher, immigration enforcement curbing labor availability and surging interest rates locking buyers out of the market,” said George Ratiu, NAA’s vice president of research.
Builder sentiment reflects those strains. Ratiu noted that the National Association of Home Builders’ Housing Market Index fell in October to its lowest reading since June 2012.
Builders also reported a sharp decline in prospective buyer traffic. Ratiu attributed that drop to affordability constraints as the 30-year mortgage rate reached 7.4%.
Discounts Help Sales But Have Limits
Builders have turned to price cuts and financing incentives to bring buyers back. New-home sales increased month over month in August, supported by incentives and mortgage rate buydowns, Ratiu said.
Those concessions have changed the price comparison between new and existing homes, but they have not removed the financing hurdle.
“With more than 40% of home builders slashing prices, the median price of a new home dropped below that of an existing one,” Ratiu said. “At the same time, even with incentives, the number of buyers who can make the financing math work is shrinking.”
The result is a difficult balance for builders. Discounts can help close sales, but fewer households can afford to buy even with that assistance.
Rental Housing Offers A Near-Term Alternative
For households priced out of ownership, single-family rentals, townhouses and apartments offer another option. Ratiu said rents tend to be more approachable than payments on a comparable mortgage.
That makes the rental market an important part of the affordability picture, though it does not resolve the broader need for more housing. September’s increase in multifamily permits and completions counters falling starts, but it is not evidence of a broad construction recovery.
For investors, the distinction matters: some local markets may support additional apartment development even as national construction weakens. Over the longer term, Ratiu emphasized, improving affordability will require more supply across both rental and ownership housing.