While the next five years could make the demographic changes and economic turbulence we’ve experienced since the pandemic look like the warm-up act, multifamily investors should take heart as many high probability scenarios ought to be constructive for apartment investing.

Already, demographics are shifting in ways that significantly impact demand for housing. Federal budget deficits, already in nosebleed territory, are worsening. (The Treasury Department announced in July that the budget deficit hit $1.4 trillion for the first nine months of fiscal 2026, a $1.9 trillion annualized level). If that weren’t enough, artificial intelligence (AI) is changing hiring and employment in unprecedented ways, and its adoption is accelerating at breathtaking speed.

The multifamily construction pipeline, which ballooned in 2021-2022 and led to a wave of new apartment deliveries since 2024, has been shrinking rapidly, setting the stage for undersupply for the next few years. Only developers with the strongest stomachs will take on 7%+ construction loans in an uncertain environment. And real estate firm JLL’s July 13 report, which flagged construction cost increases of 5% for the first half of 2026 (and the possibility that these could hit 8% by year-end) is another nail in the coffin for new development. And, while we’d love the Federal Reserve to reduce rates, today’s (or higher) interest rates are likely here to stay for a while.

Our investors trust us to deploy capital in a disciplined fashion by acquiring and improving apartments in markets we know well. Before deploying capital, we analyze a property thoroughly, stress-test our assumptions with sensitivity analysis and seek to anticipate potential changes in markets. That process is less about predicting the future and more about developing scenarios with reasonable likelihoods of coming to pass.

The scenarios below are intended to help us think strategically about our business and portfolio over the next five years. They are based on demographic and economic factors, but not potential regulatory changes, since these vary greatly by locality.

First, we unpack likely demographic shifts, essentially baked in the cake today. Then, we offer several high-probability economic scenarios. While the economic scenarios lead in slightly different directions, all roads should lead to destinations constructive for multifamily investing.

Demographic Changes Ahead. (Remember: The Die is Already Cast.)

Forecasting future market performance is different from projecting demographic changes in five years: The former requires extensive fundamental and financial analysis and a bit of conjecture. The latter is basic math – bringing today’s data forward to tomorrow.

The headline is that our population, 342 million, will barely grow – to 352 million in 2031, according to U.S. Census Bureau estimates. That sluggish growth rate, about half of what we’ve grown accustomed to, is because fertility levels – just 1.57 children per woman, per The Wall Street Journal – remain well below replacement rates and immigration has slowed to a crawl. Even massive shifts in birthrates or immigration – unlikely, to say the least – won’t meaningfully change the population in 2031.There will be winners and losers, of course – some cities will grow as others shrink but U.S. population growth in the next five years will be largely a zero-sum game.

The story gets more interesting when you peel back the onion. By 2031, the entire Baby Boomer generation – 73 million – will be 67 to 85, meaning all Boomers will be of retirement age. In five years, Boomers will comprise 23% of the population, more than a one-third larger share of the population than a decade earlier (17% in 2022), according to the Census Bureau.

In 2031, the primary renter cohort, those 25 to 34, will shrink modestly. But this will be swamped by three countervailing forces which should turbocharge apartment demand. First, Millennials (31 to 45 today), who have increasingly been delaying homeownership and choosing to rent apartments, will continue to do so, especially with today’s 6-7% mortgage rates. Second, many in the Gen Z cohort will finally leave their parents’ homes and launch households of their own. And third, the Boomer downsizing wave will hit full stride by 2031, and many Boomers will vacate their homes (primarily for financial or health reasons). Most will move to rental communities (both traditional apartments and senior housing communities) to save money, reduce maintenance or for more amenities. It’s ironic: Boomers told their kids for decades that renting was throwing money away yet by 2031, many will be renters.

Economic Scenario #1: Extended Soft Landing

In our first 2031 scenario, the Federal Reserve’s soft landing, brought about by aggressive interest rate hikes in 2021-2022, has held – sort of. Inflation in the next five years will run hotter than the Fed’s 2.0% target, probably in the range of 2.5-3.0%. Markets adjust, accepting higher inflation as the new normal. Economic (GDP) growth has been tepid, ranging from 1.8–2.4% annually since 2026, sustained by government spending, AI-driven productivity gains, and consumer spending on services and experiences. Not a recession but the economic equivalent of a treadmill at 2 mph.

Federal deficits have remained elevated, at $1.5-2.0 trillion annually. We’ve sustained high deficit spending because the U.S. dollar has remained the world’s reserve currency and Treasury auctions continued to be successful. By 2031, the U.S. federal debt-to-GDP ratio could hit 115-120% (up from about 102% or $31.7 trillion now), according to estimates by J.P. Morgan Asset Management. The bond market will continue to absorb the increased debt, and the 10-year Treasury will remain in a stable range of 4.5-5.0%.

AI will, of course, disrupt labor markets. Boston Consulting Group forecasts that AI automation will eliminate (or dramatically change) up to one in seven white-collar positions (think customer service and back-office roles) by 2031. (On the bright side, the other six office workers will be busy, among other things writing AI prompts.) New job categories – those requiring physical presence, human judgment, or specialized (trade) skills – offset many of these job losses, enabling the unemployment rate to remain in the 5.0-5.5% range. Demand for and wage growth for skilled and trade workers will remain strong. Less so for entry-level office workers.

The 2031 environment for apartment investors and operators is more favorable than the prior decade. Few projects started after 2024 (because of elevated interest rates and construction costs) and delivery slowed significantly after 2027, creating tight supply. This generates 3-5% annual rent growth from 2028-2031. The 2031 apartment market benefits from this undersupply and from the strong demand for housing because of demographic drivers – Millennials continuing to rent and Boomers downsizing, many into apartments. (As reported by Newsweek in June 2025, Point2Homes’ U.S. Census data analysis found that the number of renters over the age of 65 increased by 2.4 million, nearly 30%, between 2013 and 2023.)