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Special Report

Pullback in Multifamily Construction Starts

September 2023

Apartment Construction Starts Plummet Across the United States

Entering 2023, the country’s most active apartment developers were generally anticipating that they would start construction on only about half as many units as they were able to get underway in 2021 or 2022. This anticipated sharp slowdown in early stage building activity was registered during 2023’s second quarter, as starts in key markets fell to slightly below half the earlier norm.

Less access to development capital has been the leading factor triggering the slowdown in construction. The largest banks were generally targeting less substantial capital allocations for real estate early in 2023; likewise, many smaller banks made strategy adjustments when a handful of regional lenders failed during the spring. All development capital sources also faced more challenging financials on new projects when the pace of rent growth cooled from earlier records and when operational expenses — particularly insurance costs — soared above past norms.

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