Completions outpace starts as builders hit the brakes
Newly released U.S. Census data reveals a dramatic turnaround in the apartment construction cycle. Over the past 12 months, developers finished 222,800 more multifamily units than they started. In other words, completions have surged ahead of new groundbreakings – an unprecedented gap that underscores how sharply builders have hit the brakes. The number of multifamily units under construction is now at its lowest level since 2021 and dropping fast. This reversal comes after a pandemic-era building boom and is sending mixed signals to the market. On one hand, the wave of new deliveries is finally cresting; on the other, the pipeline for future supply is drying up.
Multifamily housing starts have plummeted from their 2022 peak, even as completions remain elevated. Higher interest rates and construction costs have curtailed new projects, leading to completions exceeding starts in the past year.
What’s driving this pullback in multifamily housing starts? Industry experts point first to financing challenges. It’s become very difficult to get a construction loan right now. Interest rates have climbed to decade highs, dramatically raising the cost of debt for new developments. At the same time, many equity investors are hesitant – convinced they can buy existing apartment assets at a discount rather than fund costly new construction. This cautious sentiment is chilling the pace of new projects despite strong underlying housing demand. Would-be developers are also contending with elevated construction expenses (from labor to land to materials), which make it hard to pencil out new deals. The result is a tough environment for building: as Jay Parsons, a veteran rental housing economist, noted, high interest rates are far more problematic for development than other issues like tariffs.
Financing crunch and a construction slowdown
Developers and lenders alike are pulling back. The data shows multifamily starts fell roughly 25% in 2024, down to about 355,000 units, after peaking at over ~530,000 in 2022. Many projects that were green-lit in 2021–2022 (when financing was cheap) are now completing, but far fewer new ones are breaking ground. The latest Census report pegged May’s annualized rate for multifamily starts at just 316,000 units – a steep drop – while the annualized pace of completions was about 487,000. This means more apartments are being finished than begun, depleting the development pipeline.
From the lending side, regional banks have tightened credit for construction loans, and raising private equity has become an uphill battle. By mid-2025, multifamily construction spending had slipped to early-2021 levels, reflecting this credit crunch. Developers who do proceed are often those with deep pockets or creative financing. For everyone else, "build-to-core" strategies are on pause.
Regional divide: Sun Belt oversupply vs. gateway constraints
Crucially, the construction slowdown is not uniform across the country. It’s very much a tale of two markets: many fast-growing Sun Belt metros are working through an oversupply of new apartments, while some coastal "gateway" cities remain starved for new housing. During the recent building boom, developers flocked to business-friendly, lower-cost regions like Texas, the Southeast, and the Mountain West—areas that are now seeing the highest volumes of new deliveries and the most downward pressure on rents. By contrast, high-cost, supply-constrained markets with restrictive zoning (e.g., New York, Los Angeles, San Francisco) added far fewer units during the boom, which is one reason rents in those areas are climbing again despite broader economic headwinds.
New data underline this divergence. In 2025, Sun Belt cities such as Charlotte, Phoenix, and Austin are each slated to grow their apartment stock by roughly 7–8%—an unusually rapid expansion in a single year. Not surprisingly, these same markets are now experiencing some of the nation’s weakest rent performance. Rents have fallen 3.5% in Austin and roughly 1.7–1.9% in Phoenix and Denver on an annual basis. Developers overshot demand, and it’s taking time for population growth to catch up. Other Sun Belt hubs like Houston, Atlanta, and Nashville are also digesting large volumes of new supply, keeping rent growth muted for now.
In severely oversupplied submarkets like Downtown Austin—where new deliveries have expanded inventory by 7.8% year-over-year—we at TheGuarantors are seeing landlords struggle to fill units, leading to significant shifts in leasing behavior. Screening standards are loosening: applicants who would have previously been declined or classified as “conditional” are now securing leases with minimal deposits or basic guarantees. Our data shows a 35% increase in lease approvals for applicants with subprime credit in high-supply Sun Belt markets compared to this time last year. At one landlord, we observed a sharp increase in conditional renters being approved without any form of protection. While this strategy helps maintain short-term occupancy, it also introduces higher default and delinquency risk—precisely where TheGuarantors’ lease guarantee products can help operators de-risk while preserving leasing velocity.
We’re also seeing a slowdown in leasing velocity in these oversupplied metros despite record unit availability. In Phoenix, for example, new apartment stock has grown by 6.9% year-over-year, but the average days-on-market for Class A units has increased from ~21 to ~36 days. The applicant pool is thinner as job growth normalizes and renters stay put longer, particularly when existing leases come with generous concessions. This dynamic leaves operators facing a shrinking pool of qualified prospects and increased pressure to relax underwriting standards to keep up leasing pace. By leveraging our guarantee solutions, landlords can responsibly convert borderline applicants without absorbing the full financial risk—a critical advantage in these saturated conditions.
By contrast, supply-constrained markets are showing much stronger fundamentals. New York City, despite leading the nation in total new apartment deliveries, will only expand its inventory by about 2.8% this year—a much slower rate relative to its base. As a result, rents in Manhattan and the broader NYC metro are rising again, up roughly 3.5% year-over-year, even as new units come online. Other markets with limited new construction—such as Northern New Jersey and even mid-sized cities like Kansas City—are also registering solid rent increases around 3%. In short, markets that avoided a building spree now have the upper hand. Renters today have more negotiating power in Austin than in San Francisco—a reversal from just a few years ago. As developers nationally continue to pull back, these regional imbalances could gradually correct: high-supply markets may find relief as future projects are delayed, while tight markets are likely to keep attracting the limited capital still available for development.
Class A vs. Class B: A two-tier market
Another dynamic at play is the difference between luxury Class A rentals and more affordable Class B/C units. The vast majority of new construction in recent years has targeted the high-end segment – shiny Class A buildings with top amenities, commanding premium rents. As a result, this segment has faced the fiercest competition from oversupply. In many markets, new Class A lease-ups have had to offer hefty concessions to fill units, and their occupancy took a hit in 2023. However, we’re now seeing a rebound: occupancy in stabilized Class A apartments hit 95.7% in May 2025, the highest in nearly three years. Even so, Class A still trails slightly behind the 95.8% occupancy in Class B mid-tier apartments. In other words, the more affordable rentals (often older properties) continue to enjoy very tight occupancy, benefitting from steady demand and limited new competition. Renters who are priced out of luxury units – or simply seeking value – have been flocking to Class B and C communities, keeping those properties full. Indeed, workforce housing operators report solid rent growth and renewal rates as tenants stay put for affordability.
This two-tier market means the pain (and opportunity) is uneven. Class A landlords have felt the brunt of the supply glut, with flat or declining rents in some cities over the past year. Many institutional investors also paused ground-up development because the luxury segment’s returns looked shaky in the short run. Meanwhile, owners of Class B/C apartments – with no new supply diluting their tenant base – have seen more stable rent trends. As the cycle turns, the Class A sector could have more upside (as its current oversupply gets absorbed). But for now, it’s the middle-market rentals that are logging the highest occupancy and holding onto pricing power, a reminder that the housing affordability crunch cuts both ways.
Light at the end of the pipeline? (2027–2028 outlook)
For renters enjoying a breather on rent prices, today’s construction slump could sow the seeds of a future housing squeeze. Analysts predict that multifamily completions will decline sharply after 2025, given the lack of new starts. Industry forecasts show annual apartment deliveries falling from over 500,000 units in 2024 to roughly 300,000 by 2027, the lowest level in a decade. In fact, one research bulletin notes that 2024 marked a peak in supply, and 2025 completions are expected to drop ~15% with even deeper cuts in 2026–27.
What happens when the supply pipeline hits bottom? Many in the industry expect the pendulum to swing back toward undersupply. Jay Parsons observes that the current pullback buttresses the case to get new projects started, as they would complete in 2027–28 when there will almost certainly be very limited supply. In other words, projects breaking ground now could open into a far less crowded field. By 2027, if few new apartments are coming online, vacancy rates could tighten again and landlords may regain pricing power. Rent growth, which has been muted in 2023–2024, is projected to rebound by the latter half of the decade. Industry projections see national rent growth accelerating from about 1% in 2025 to around 2.7% in 2027 as the excess supply is absorbed. In the short term, renters in many cities are benefiting from concessions and flat rents; but within a couple of years the narrative may flip back to housing shortages. That prospect is already shifting investor sentiment – what feels like a glut today could be tomorrow’s opportunity for those who build (or buy) at the cyclical bottom.
Looking ahead for renters, landlords, and developers
The surge of new apartment deliveries is providing renters some overdue relief. Vacancies have ticked up, rent growth has flattened, and in many markets, renters have more options than they’ve seen in years. But even as those new units hit the market, a sharp slowdown in new construction starts is underway—a shift that could reshape the landscape over the next few years. For landlords, lenders, and investors feeling the pressure from today’s oversupply, there’s a silver lining: fewer projects breaking ground now means less competition down the line, once the current supply wave is absorbed.
Developers with a long-term view are already adjusting their strategies. Some are locking in lower-priced land and streamlining designs so they can move quickly when financing improves. As one analyst put it, expensive debt has succeeded where policy often fails—cooling construction activity, which could set the stage for renewed rent inflation in the future.
Over the next 18 to 24 months, all eyes will be on the Federal Reserve and credit markets. A meaningful drop in interest rates could reopen the spigot for apartment development, especially with rental demand supported by strong job growth and millions of young adults still forming households. In the meantime, the U.S. multifamily sector faces a rare moment of overlap: delivering record numbers of new apartments today, while simultaneously planting the seeds for the next supply shortage tomorrow.
For renters and policymakers, the hope is that this cycle avoids the extreme swings of past boom-bust periods. For developers and investors, the message is clear: caution dominates 2025, but those positioned to build through the downturn may be best rewarded when the market inevitably tightens again.
Sources:
U.S. Census Bureau;
Jay Parsons via LinkedIn linkedin.com;
NAHB nahb.org;
Yardi Matrix/CRE Daily credaily.com;
GlobeSt globest.com;
29th Street Capital 29sc.com;
CRE Daily analysiscredaily.com
