It has been hard enough to build apartments over the last couple of years. But if you’re eyeing an urban infill project? Good luck with that.
“It's still extremely difficult to develop traditional multifamily infill,” Todd Wigfield, co-head of Greystar’s Americas principal business, told Multifamily Dive. “Mid-rises and high-rises are just really, really hard to get done.”
In the second quarter of 2025, multifamily construction saw growth in smaller geographies, with gains across all areas except large metros, where more dense development is common, according to the National Association of Home Builders’ Home Building Geography Index (HBGI).
In Q2, the market share of apartment starts in large metro core counties continued a long-term downward trend, falling 12.3% on a four-quarter year-over-year moving average.
New construction in large metro suburban counties and small metro core counties was essentially flat, while large metro outlying areas and small metro outlying counties saw growth of at least 20% YOY.
“Urban core and inner suburb multifamily development continues to be soft, particularly in larger metropolitan areas,” NAHB Chief Economist Robert Dietz told Multifamily Dive in emailed comments.
The math doesn’t pencil out
Greystar’s Wigfield said that developers have been focused on the “outer rings” while also prioritizing much-needed attainable, affordable housing. “Really trying to hit the market needs and achieve financeable yields is where we’ve been focused,” he said.
It's easy to understand why. Bigger, high-dollar deals have lower yields, according to Wigfield. “They tend to be more expensive,” he said. “And so it's just a big risk.”
In addition, it takes a fairly sizable organization to write the check for high-density $200- or $300-million projects. Trying to get those types of projects through investment committees has been “extraordinarily difficult” over the last couple of years, according to Wigfield.
“We had to look at it as a company and say, ‘Is that worth the risk? Is that what we should be doing at this time in the market?’” Wigfield said.
For a company like Greystar, with a “broad spectrum of investments and markets across the country,” it is easier to develop other opportunities, according to Wigfield. “When you start to look across the board and level set, [high-density development] certainly didn't feel like the place where we needed to be,” Wigfield said. “And I think a lot of others have felt the same.”
What will bring high-density development back?
Part of the reason high-density development doesn’t make sense right now is the glut of projects in many metros. “There were a lot of high-density projects that were delivered in a lot of the markets,” Wigfield said.
At least supply is slowing. After 10 quarters of more than 100,000 units being delivered, completions fell to 89,400 units in Q4 2025, according to RealPage. But many units still need to be absorbed before the market returns to normal.
“More inventory has to clear,” Wigfield said. “That needs to happen. We need to see really good stabilization of rent rolls.”
NAHB’s Dietz thinks regulatory reform is also needed to incentivize higher-density development. “This could include reforms to parking requirements, permit and impact fees, and zoning/permitting rules and processes,” he said.
A group of lawmakers seems to understand those hurdles and is attempting to address them with the new bipartisan Build HUBS Act, which aims to boost the construction of housing near transit hubs nationwide. Among other changes, it would waive certain National Environmental Policy Act requirements for office-to-residential conversions and infill development.
The demand issue
In high-density areas, barriers to supply are often cited as a roadblock. But Dietz sees demand issues as well.
“We will need to experience an uptick in hiring, particularly for younger individuals,” he said.
However, the unemployment rate among those aged 16 to 24 is rising, ending 2025 at 10.4%, up from 9% in late 2024 and 8% in late 2023, according to LeaseLock Chief Economist Greg Willett.
Artificial intelligence could push those percentages even higher. For instance, Amazon and other tech employers have cut jobs and pointed to AI as the culprit, according to HR Dive.
“While it's hard to pinpoint how much of that rising unemployment reflects AI's ability to cover tasks previously done by entry-level workers, shifts in the way we do business do appear to be having some impact on the numbers,” Willett told Multifamily Dive in emailed comments. “Recent grads are ending up back home with their parents more frequently than was the case a year or two ago.”
If younger people continue to hemorrhage jobs, apartments of all types will take a hit. “Young adults forming new households make a strong contribution to demand for apartments,” Willett said.
