Stuart shares trends, challenges and opportunities in multifamily markets across the country. 

A tale of two markets

The market is characterized by two kinds of investors: those who are comfortable in the current environment and ready to act, and those who are taking a more conservative approach.

Some multifamily investors have accepted elevated interest rates are here to stay and seek capital. “There is more acquisition activity—people have more conviction making investments and purchasing assets,” Stuart said. 

“There's another segment of the market that’s quite cautious about the impact of tariffs on operational costs, but I am optimistic that we will have more clarity on that aspect of the industry heading into 2026,” Stuart said. Multifamily uses a lot of imported products and materials, not only for new construction, but also renovations and large-scale projects, such as roofing, electric and plumbing work. 

This group is also concerned about uncertainties around labor costs, inflation and potential rent control legislation.

Challenges for multifamily

Multifamily faces a host of challenges. Affordability and inflation are chief among them. 

Affordability

Affordability is the biggest challenge for multifamily across the country and requires significantly growing the housing supply. 

“If we as a society have a goal for overall rent levels and housing costs to be more affordable, the development of housing has to keep up with household formation and household mobility,” Stuart said.

While this is a concern nationwide, major metros face a steep uphill battle. 

“Large cities have the most acute issues around affordability—historically, they’ve been the hardest places to add new supply,” he said. In New York and other large metros, land availability is a factor. Zoning and additional legislation often create unintended restrictions on housing affordability and the multifamily sector as a whole. 

NIMBYism is also a factor in many of these cities. Construction can be disruptive, noisy and—while temporary—unpleasant if you’re living with it as a neighbor.

Inflation

Inflation is another major concern for multifamily. While inflation can lead to higher rental income and property values, the negatives may outweigh the positives.

Investors are already contending with several issues that increased prices could exacerbate:

• Potential labor shortages stemming from immigration policies 
• More expensive materials as a result of higher tariffs
• Higher borrowing costs because of interest rates
• Rising insurance costs fueled by severe weather events

Material, labor, insurance and maintenance costs usually increase with inflation, adding to already rising multifamily expenses. Higher materials and construction expenses may also increase existing apartments’ replacement cost value.

Opportunities in multifamily

Despite a challenging economic environment, opportunities remain in multifamily.

• Combatting inflation: “Many investors see an opportunity to invest in the multifamily sector because it’s a natural inflation edge and a sector that is historically hard to increase supply,” Stuart said. Plus, cap rates have expanded because of interest rates’ movement over the last two years. 
• Proptech: Multifamily proptech is wide ranging and includes electronic key access, smart tools to help manage lighting, heating, cooling and other complex systems involving solar, security and water conservation. And not to be forgotten is back office technology that help streamline accounting, invoicing and vendor payments. “Tech adoption in commercial real estate varies widely, and the value delivered to the end user can also vary widely. It really requires some scale to deliver value to the investor,” Stuart said. But technology grows more accessible over time. For example, electronic key access is less expensive today than it was five years ago. “Bill Gates once said we overestimate the change that occurs in two years and underestimate the change that occurs in the next 10,” Stuart said. “Property management systems are a terrific example of this. The fastest growing companies in that space all started in the last 15 years and have quickly gained market share.”
• Local legislation: While presidential administration policies could impact multifamily, local legislation can have a much greater effect on the sector. For example, a recent Minnesota law made significant changes to shared-meter utility billing regulations. Likewise, recent Colorado legislation states that landlords may not require prospective renters to have an annual income exceeding 200% of the annual rent.

The bottom line: Despite uncertainty around tariffs, interest rates and government policies, multifamily remains strong nationwide. However, real estate is a local game, so it’s important that investors consider the dynamics of their specific markets.