Confidence among multifamily developers weakened in the third quarter of 2026 as elevated borrowing costs, rising construction expenses, and project approval delays continued to weigh on new housing development, according to the National Association of Home Builders (NAHB) Multifamily Market Survey.
The survey's Multifamily Production Index (MPI), which measures developer sentiment toward new multifamily construction, fell five points year-over-year to 41. All four market segments recorded declines, with subsidized housing reaching 49, garden and low-rise apartments at 48, mid- and high-rise developments at 33, and built-for-sale condominiums at 31. Readings below 50 indicate that more developers view market conditions as poor rather than good.
Meanwhile, the Multifamily Occupancy Index (MOI), which tracks conditions for existing rental apartment occupancy, also declined five points year-over-year to 69. Despite the decrease, all three segments remained above the 50-point threshold, indicating that occupancy conditions continue to be viewed more favorably than unfavorably. Garden and low-rise properties recorded an index of 70, mid- and high-rise properties reached 59, and subsidized housing improved to 83.
Developers continue to face pressure from high interest rates, construction costs that remain elevated relative to achievable rents, and delays in obtaining project approvals and connecting developments to roads and utilities. These challenges are contributing to longer construction timelines and weakening expectations for future development activity. NAHB's 2027 forecast also projects a decline in multifamily housing starts.
Despite the slowdown, most developers reported relatively stable market conditions compared with the previous quarter. Approximately 66% said conditions remained unchanged, while 28% reported deterioration and only 6% indicated improvement.
NAHB noted that regulatory reforms could help ease some development cost pressures, but the industry would also benefit from faster permitting processes and lower interest rates on development and construction loans.
The latest findings highlight a growing divide between new multifamily development and existing rental property performance. While occupancy conditions remain relatively resilient, declining production sentiment signals continued challenges for developers, investors, and multifamily operators navigating financing costs, construction expenses, and the broader rental housing market.
Source: NAHB Eye on Housing
