Multifamily Construction Financing Plentiful—If You Know Where to Look
Zachary Streit of Priority Capital Advisory on the improving capital markets landscape for new builds.
Despite headlines dominated by tariffs, Middle East conflict, high treasury rates and uncertain short-term rate cuts, a bright spot remains: Construction financing for multifamily is still widely available. Developers and investors pursuing well-located, viable apartment projects should be pleasantly surprised that banks are back and, with them, the plentiful availability of low-cost capital. Meanwhile, debt funds are copious, hungry and their spreads have compressed, and insurance companies are offering a combination of high leverage products and competing with banks on lower leverage deals.
Who’s lending and why
The most interesting development by far to me over the last nine months is the reemergence of regional and national banks as the cornerstone of low-cost construction financing. Just a year ago, obtaining multifamily construction financing with pricing in the SOFR plus 200 to 300 basis points was elusive at best, would likely require massive deposits and leverage would be in the 50 percent LTC range. Not anymore. Sixty-five percent LTC leverage at the aforementioned spread levels is now widely available.
And, there’s another reason this is important. A return of attractively priced bank financing is also a precursor to the return of institutional equity to the multifamily development space. To be clear, construction costs and rates likely need to materially decrease for this to occur, but the absence of cheap financing was a major roadblock removed, so this reemergence has very positive implications.
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Debt funds are perhaps the most flexible of the capital providers, offering high-leverage construction loans (sometimes up to 80-85% LTC) that can bridge appraisal gaps or support more complex capital stacks. These nonbank lenders are often best suited for developers seeking speed, non-recourse executions, and a partner that can underwrite beyond just the spreadsheet. Debt fund pricing spreads range from 450 to 650 over SOFR and up. Of note, and to help offset pricing, many debt funds allow for the inclusion of PACE financing in the capital stack. PACE financing is relatively cheap form of capital and its inclusion can save the project around 200 basis points or more in overall rate. So, the savings is significant.
Life insurance companies, traditionally associated with long-term, low-leverage debt, are also active in the construction space. For the right borrower and project—typically Class A developments in core or core-adjacent markets—life companies offer highly attractive execution with low spreads (200 over SOFR and up). Some even offer high leverage solutions that can bridge a portion of a project’s equity gap. For those projects, leverage can exceed 80% loan to cost in return for a mid-single digit rate on a portion of the of the loan and upside participation.
Where it works
This financing is working best for projects that have equity already raised—a point that cannot be more heavily underscored—and with a clear story: infill locations with strong renter demand, favorable entitlement paths, and developers with a proven ability to execute. Many lenders are still underwriting to stabilized DSCR even during lease-up, so sponsorship strength and market fundamentals are critical. Projects near universities, transportation hubs, or major employment centers are attracting the most lender interest.
What it takes to get a deal done
Today’s lending environment rewards preparation. Developers must be ready to present a verifiable equity capital partner or syndicate, a comprehensive development budget, detailed pro forma, robust market comparables, and a clear entitlement timeline. Experienced sponsors with a track record of on-time, on-budget completions have a distinct advantage.
Lenders are also scrutinizing general contractor strength, guaranteed maximum price contracts, and construction contingency levels more than ever. Interest reserves and completion guarantees remain standard for debt funds and life companies (banks are requiring either a full or partial repayment guarantee), and third-party reports—appraisal, environmental, and plan reviews—are expected early in the process.
Ultimately, from what I have been seeing trending lately, multifamily construction financing isn’t just available—it’s competitive. But the landscape has shifted from “can I borrow” to “how much can I borrow” to “who will be my best long-term partner?” For developers who are well-positioned and know how to navigate today’s capital stack, the opportunity to get projects funded and built remains very real.
Zachary Streit is founder & president of Priority Capital Advisory, a boutique debt and equity capital advisor for middle-market and institutional commercial real estate sponsors and investors.
