2026 Multifamily Outlook

According to the Emerging Trends in Real Estate 2026 report produced by PricewaterhouseCoopers (PWC) and the Urban Land Institute (ULI), multifamily construction starts have declined sharply – by more than 40% from their 2023 peak – and are expected to remain subdued through 2026 due to elevated construction costs, tighter capital markets and cautious lender underwriting.  The pullback in development is expected to meaningfully reduce new supply, which will help balance supply and demand. When you consider that the lag time between a developer deciding to construct a new project until its completion is generally several years, there is likely to be a dearth of new supply until 2028 or beyond.

From a demand standpoint, renter fundamentals remain resilient. High mortgage rates, limited single-family inventory and homeownership affordability challenges continue to keep many households in the rental market longer, providing a stable base of demand even as overall economic growth moderates. As a result, rents are expected to grow modestly in 2026, following a period of decline in many markets in 2024-2025 tied to oversupply.  Industry forecasts point to national rent growth of 2.0% to 2.5% in 2026, marking a return to sustainable growth keeping pace with inflation.

Vacancy trends are also expected to improve incrementally. National multifamily vacancy rates, which rose meaningfully during the recent supply surge, were forecasted to peak in late 2025 before gradually easing through 2026.  This slow tightening underscores the sector’s transition toward balance rather than a rapid recovery.

Multifamily continues to be among the more favored commercial real estate asset classes, benefiting from strong demand, a broad tenant base, short-term leases and long-term demographic trends such as lifestyle flexibility and an undersupply of housing. 2026 represents a year of stabilization marked by declining supply, steady occupancy and moderate rent growth – laying the groundwork for stronger long-term performance.

The Growing Importance of Retaining Residents

With a record number of new apartments delivered in 2024 and 2025, competition for residents is fierce and resident retention has become a central focus for property owners.  Boosting retention is no longer an option, it is a core tactic for stabilizing apartment occupancy and protecting cash flow.  The cost of losing a resident can be significant with vacancy loss, marketing, leasing commissions, tenant concessions and repair costs often totaling more than $5,000 per move-out. And in markets like Denver and Phoenix, the gap between rents on lease renewals and new leases also means operators may be forced to replace a non-renewing resident at a lower effective rent, even before factoring in vacancy and turnover costs.

Looking ahead, the strongest operators will be those who proactively invest in retention including prioritizing resident engagement through community events, thoughtful renewal incentives and consistent communication.  Fortunately for property owners, new apartment deliveries are forecasted to fall this year almost 70% from the 2024 peak – stimulating rent growth.   Operators who view resident retention as a strategic objective are positioning their properties for stable occupancy, lower turnover costs and stronger cash flow.