Multifamily starts tumble 26%

Leslie Shaver
Senior Reporter

Dive Brief:

• October starts for buildings with five or more units fell 25.9% from September and 10.8% year over year to a seasonally adjusted rate of 347,000 apartments, according to the monthly report from HUD and the U.S. Census Bureau released Friday.
• With multifamily pulling down the numbers, housing starts fell to the lowest level in October since 2020. Overall, they came in at 1.2 million — 4.6% below the revised September estimate of 1.3 million and 7.8% below October 2024’s 1.4 million.
• At the end of October, 699,000 units were under construction, a 13.1% YOY drop and a 0.3% month-over-month increase. In a sign that new supply is easing up, multifamily developers finished an annualized 367,000 apartments in buildings with five or more units, a 41.9% YOY drop and an 8.9% month-over-month decrease.

Dive Insight:

Apartment developers pulled permits for a seasonally adjusted rate of 481,000 apartments in buildings with five units or more in October. That was a 17.9% YOY increase and a 0.4% increase compared to September.

For many developers, stubbornly high new inventory and a constrained equity market have made it difficult to break ground on new properties, even when they’re permitted.

“Construction equity is the problem,” Reece Kimsey, partner and head of site acquisitions at still-active developer Middleburg Communities, told Multifamily Dive. “You can get equity, but it might not be the equity that you’re typically used to getting.”

Much of the available capital is preferred equity, which comes at a high cost, according to Kimsey.

“They know we need that last check to get over the finish line,” Kimsey said. “So they’re going to beat you up on the terms.”

If a developer isn’t under a strict deadline to start a project, the best approach is to wait and see whether construction costs keep coming down and equity terms improve.

“We’ll wait a few more months if we need to and see if those [equity terms] change,” Kimsey said.