Multifamily Investors Navigate Opportunity and Uncertainty
At MHN's latest Voices webinar, industry experts weighed in on what's been driving investment decisions this year and what to expect for the second half.
Debt capital remains plentiful and investor interest in multifamily remains strong, but uncertainty around rent growth, regulation and broader market conditions continues are tempering transaction activity this year.
These were among the key themes discussed during Multi-Housing News’ Multifamily Midyear Investment Outlook webinar on July 16, moderated by Editorial Director Suzann Silverman. Panelists examined the outlook for rent growth, the strength of debt markets and the policy issues shaping investment and development activity for the remainder of the year.
Slow rent growth clouds the market
Paul Fiorilla, associate director at Yardi Matrix, said slow rent growth has continued to complicate multifamily investment decisions since 2023. Following the double-digit rent gains recorded after the pandemic, national rents increased just 1 percent during the first half of the year, he said.
Fiorilla noted that market performance has varied across the nation. While the Midwest, Northeast and gateway markets such as New York, Chicago and San Francisco have continued to post stronger rent growth, many Sun Belt and Mountain West markets remain under pressure as elevated supply has led owners to compete more aggressively for renters.
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“People need to understand where rents are going to underwrite transactions,” Kelli Carhart, president & head of multifamily capital markets at CBRE, said. “That’s really been holding back some of the momentum.”
Mike Cale, senior vice president of capital markets at Berkadia, echoed that sentiment, noting that most properties changing hands are those that “need to sell,” rather than owners choosing to capitalize on market conditions. He added that transaction activity is likely to remain similar to last year as uncertainty surrounding geopolitical, regulatory and operational factors continues to weigh on the market.
Although apartment starts peaked at roughly 700,000 units in 2022, Fiorilla said deliveries are expected to moderate over the next several years. He forecasts approximately 478,000 deliveries in 2026, followed by around 450,000 annually in the years ahead.
“I think it’ll take at least four to six quarters before that excess stock gets delivered,” Fiorilla said. “Then we can start to get back to more normal multifamily rent growth, beginning in 2028.”
Where’s the capital flowing?
Even though uncertainty surrounding future rent growth has slowed multifamily transaction activity, the panel agreed that there were still opportunities within the market. Throughout the discussion, the speakers explained that while equity investors are waiting for more certainty in the market, capital remains available on the debt side.
“Capital markets liquidity is in a really good place right now,” said Justin Levitt, managing director & head of the Northeast region for U.S. debt at PGIM.
Levitt said life companies, banks, debt funds and agency lenders continue to provide financing for multifamily transactions despite the uncertain interest rate environment.
“There’s just no clarity right now that people can see from a variety of aspects, whether that’s geopolitical, whether (that’s) regulatory or whether it’s operational,” Cale said. “The only thing that’s really clear is the debt that’s out there.” He added that multifamily continues to benefit from a broad range of financing options, including Fannie Mae, Freddie Mac and HUD lending programs, contributing to a deeper pool of available debt capital.
With fewer opportunities on the equity side, panelists said investors have increasingly turned to private credit, mezzanine financing and preferred equity as they search for higher-yield opportunities.
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As debt capital remains readily available, Carhart said investors have shifted toward higher-yield opportunities. She said that fundraising increased 35 percent last year, with much of that capital flowing toward value-add and opportunistic strategies rather than core investments. She identified senior housing and student housing as two sectors attracting increased investor interest.
Policy and regulation shape investment
Panelists also reacted to the passing of the 21st Century ROAD to Housing Act, which became law on July 10. Sharon Wilson Géno, president of the National Multifamily Housing Council, described it as the first major piece of federal housing legislation in 30 years. While she said the measure will provide incremental benefits to the industry, she believes it also lays the groundwork for more substantial housing legislation in the years ahead.
Wilson Géno cautioned that no single piece of legislation will be a cure-all for the housing industry’s challenges. “There’s no magic silver bullet here that’s just going to open the floodgates and make housing less expensive to construct or operate,” she said. However, she added that the legislation creates momentum for future action, noting “there is real opportunity for real, long-lasting solutions.”
While many provisions are expected to benefit multifamily, she said additional guidance is still needed on certain measures, particularly those affecting the build-to-rent sector. She added that once the Treasury Department clarifies those provisions, the added certainty could help spur additional investment in the asset class.
Beyond the ROAD to Housing Act, the panel discussed how regulatory uncertainty also influences investor activity in multifamily. Wilson Géno pointed to rent control proposals, fee restrictions and rising operating costs as ongoing concerns, while Levitt said regulation broadly remains one of the industry’s biggest risks.
“Whenever I get on a panel and the moderator says, ‘What’s the biggest risk to the industry?’ I always say regulatory issues are the biggest concern because it brings volatility and it’s out of our control,” Levitt said.
Carhart shared the same idea that regulatory risk is influencing where capital is being deployed. She noted that investment committees are less focused on geopolitical issues and more on the regulatory environment. According to Carhart, investors are now “voting with their capital,” by favoring markets with lower regulatory risk.
