Dive Brief:
- New apartment construction activity declined on both a yearly and quarterly basis in the first quarter of 2026 as market conditions remain challenging for ground-up projects, according to a May report from CoStar and its subsidiary Apartments.com.
- Multifamily starts fell to approximately 55,000 units nationwide in Q1 2026, per the report. That represents a 73% decrease from the peak in early 2022 and the lowest quarterly level since 2011.
- Currently, elevated financing and development costs, coupled with slow rent growth, are constraining new construction across most markets. The sustained drop in apartment starts “is expected to result in materially lower new supply levels in the coming years,” according to CoStar.
Dive Insight:
Although the market is still absorbing a large volume of multifamily projects from recent years, delivery volumes are slowing, according to the report. Apartment deliveries reached a multidecade high in 2024 and have since trended down, with completed units declining by roughly 26% over the past four quarters.
There are now fewer major markets with apartment construction pipelines above historically elevated levels than in recent quarters, indicating that the slowdown in development is becoming more widespread across the country, per the report.
"Developers have pulled back sharply as weaker rent growth and higher financing costs weigh on project feasibility," Grant Montgomery, national director of U.S. multifamily analytics at CoStar Group, said in the release. "While completions remain elevated for now, the contraction in the construction pipeline points to more balanced supply conditions ahead."
The number of units under construction nationwide declined to roughly 579,000 in Q1 2026. That’s down more than 50% from its peak in early 2023 and is broadly in line with mid-2010 levels, per the report.
These trends vary by region, with the Mountain and South regions maintaining the largest development pipelines relative to existing inventory, while the Northeast and Midwest regions are more constrained. The Pacific region has the lowest exposure to new supply.
Miami and Charlotte, North Carolina, had the highest apartment development intensity relative to market size, with more than 6% of their existing inventory under construction, while Norfolk, Virginia, and Memphis, Tennessee, had the least at less than 1%.
By contrast, the U.S. Census Bureau’s reports on multifamily starts so far this year have indicated year-over-year increases. The seasonally adjusted rate for starts for buildings with five or more units rose 56.9% year over year in January, surging to “what appears to be an unsustainable high annualized pace,” National Association of Homebuilders Chief Economist Robert Dietz said at the time. The Census Bureau’s initial estimates for February show apartment construction rose 10% YOY and was up 13.5% YOY in March.
However, CoStar and the U.S. Census Bureau define and report their metrics differently, and even when converted, their approaches capture activity differently over time, a CoStar spokesperson told Multifamily Dive in an email.
“Census relies on a survey of permitting and construction activity, while CoStar tracks individual projects and updates them as new information becomes available,” the spokesperson said. “As a result, it’s common for short-term comparisons between Census [Seasonally Adjusted Annual Rate] data and property-level quarterly totals to diverge, even though they generally point to the same broader trend in construction activity.”
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