Starts Crash, Tax Code Resets, and the Setup Improves
May housing starts hit five-year lows, construction delays finally eased, transactions kept rebounding, and the One Big Beautiful Bill restored 100% bonus depreciation. Each of these on its own is significant. Together, they reframe the next 24 months for multifamily.
June’s data set was unusually clean. Housing starts collapsed to a five-year low. The NMHC construction-delay survey produced its best print since 2021. Transaction volume kept climbing. And Congress passed legislation that materially improves after-tax economics for multifamily owners and operators. None of these data points moved the dial on its own, but read together they describe a setup we have been positioning for: tightening forward supply, recovering transaction liquidity, and a tax regime that rewards exactly the kind of value-add operating work we do.
Housing Starts Drop to Five-Year Lows
The most consequential supply signal in months landed mid-June. NAHB and Census/HUD reported May housing starts fell 9.8% to an annualized 1.26 million units[1], the steepest monthly decline in nearly two years. Multifamily drove the move—starts on buildings with five or more units fell 29.7% to a 332,000 annualized pace, the lowest multifamily groundbreaking level since 2020. Single-family starts ticked up 0.4% but remained down 7.3% year over year.
Tighter credit, elevated construction costs, and uncertainty around rent trajectories drove the pullback. For existing operators and near-term buyers, the slowdown rebalances supply-demand fundamentals and lowers oversupply risk into 2026–2027. For our underwriting purposes this is one of the cleaner forward signals we have seen in the cycle: the deliveries that will compete with our acquisitions over the next 24 months are already in the pipeline and visible. Anything that has not broken ground by now is unlikely to deliver before 2027 at the earliest. That reinforces our focus on stabilized and light-to-moderate value-add properties with strong current cash flow.
The supply problem of 2024 is already becoming the supply scarcity of 2027. Underwrite the gap, not the headline.
Construction Delays Are Finally Easing
For the first time since 2021, fewer than half of developers surveyed by NMHC reported construction delays—43% in June 2025, down from 58% in March[2]. Labor availability also improved, particularly in the Southeast. The drop in delays is a notable shift in sentiment, plausibly tied to the sharp pullback in starts and reduced competition for trades and materials.
Headwinds have not disappeared. Over 70% of developers still report elevated input costs requiring repricing or rebidding scopes of work, and banks remain selective on construction lending. But the trend is one of stabilization rather than worsening. That bodes well for assets currently under construction and for sponsors who can deliver into thinning competitive supply over the next 18 months.
Rent Growth: Stable Headline, Wider Dispersion
National rent growth remained modest but resilient, posting year-over-year gains of just over 1% for the seventh straight quarter. The average masks meaningful variation across asset class and geography.
By product type, 1- and 2-star assets—typically older, more affordable properties with less exposure to new development—continued to lead at roughly 1.7% YoY. 3-star assets, the core of workforce housing, are growing around 1.0%. 4- and 5-star luxury units, which absorbed the largest 2023–2024 supply wave, are still under pressure at roughly 0.5% YoY, though concessions are beginning to compress and lease-up velocity is improving.
Regionally, the Midwest is leading nationally, with Kansas City, Chicago, and Detroit posting rent growth above 3%[3]. The Northeast also performed well, with Pittsburgh, D.C., and Baltimore surpassing national averages. Sun Belt and Mountain West markets affected by overbuilding continue to struggle: Austin, Denver, and Phoenix were each down more than 2.5% YoY[4], while Atlanta, Jacksonville, and Raleigh saw more moderate declines.
Concessions remain widespread in Class A lease-ups in oversupplied markets, but vacancy is stabilizing, and with new construction expected to decelerate further in Q3 and Q4, many analysts now anticipate national rent growth approaching 2.5% by year-end. For our acquisitions strategy this means our 3-star Midwest and Southeast focus remains well-aligned: steady cash flow, manageable capex, in-line rent growth, and minimal exposure to the concession dynamics dragging down Class A returns. We expect more uniform rent gains across segments in 2026 as high-supply metros correct, but selective market exposure remains essential in 2025.
Transactions Are Rebounding—and Pricing Is Following
After bottoming in early 2023, multifamily investment activity has staged a steady comeback. Sales volume hit $146 billion in 2024—up 22% from the prior year—and that strength carried into 2025. Q1 transaction volume jumped 33% year over year per CBRE[5]. While recent macro uncertainty may slightly dampen the pace, the broader trajectory points to a sector in recovery.
This is how recovery typically starts. Historically, transaction volume increases before prices do. We are seeing that rhythm now: deals are getting done, capital is flowing back, and national price declines have moderated. CoStar’s repeat-sale data shows multifamily values are off roughly 21% from their 2022 peak[6], with the value-weighted index actually up 3% year over year through Q1 2025—a notable inflection after two years of decline.
The split across asset classes is notable. 4- and 5-star assets have dominated recent volume, with cap rates stabilizing in the mid-5s and prices nearing $300,000 per unit; some core markets are seeing sub-5% cap trades again. 3-star assets have softened further, with cap rates around 6%, prices near $175,000 per unit, and buyers demanding a higher risk premium for non-core locations.
This is the environment we like to buy in: stabilized or improving pricing, limited new construction ahead, less competition from institutional capital. It is also where our GP Fund strategy thrives—co-investing in select, off-market or mispriced deals with active asset management and yield-to-cost in the mid-6s or better.
The One Big Beautiful Bill Resets Multifamily Tax Economics
The Senate’s One Big Beautiful Bill Act provides meaningful support for multifamily real estate investors by restoring and expanding several critical tax provisions. Most importantly, it reinstates 100% bonus depreciation for qualifying property placed in service on or after January 19, 2025[7], allowing investors to immediately expense qualified property and improvements. The first-year deduction is now permanent rather than phasing down to 40% in 2025 and zero by 2027 as it would have under the prior TCJA schedule. For value-add multifamily, where cost-segregation studies routinely classify 25–30% of an acquisition’s basis into 5-, 7-, and 15-year property, the after-tax cash flow improvement is material.
The bill also loosens interest deductibility restrictions and preserves deductions on pass-through income, making it easier to optimize financing and ownership structures, and providing additional flexibility for investors using leverage through LLCs and partnerships.
The cost is real: the legislation would add roughly $4 trillion to the national debt over ten years, including approximately $700 billion in incremental interest expense. Against that backdrop, the Trump administration has continued to push publicly for significant rate cuts[8], citing the $9 trillion in federal debt scheduled to roll over and the pressure that elevated rates impose on refinancing economics.
The combination of looser fiscal policy, political pressure for easier monetary policy, and large deficits historically supports a higher long-term inflation regime. For investors, real estate becomes an increasingly attractive hedge in that scenario: multifamily benefits from rising replacement costs, higher nominal rent growth, and fixed-rate debt that becomes cheaper in real terms. The signal we take from this is straightforward—the case for owning tangible, income-generating assets with durable demand fundamentals is reinforced, not weakened, by the policy mix taking shape.
Deficit-financed tax cuts plus political pressure for rate cuts plus structural housing shortage. That is the macro setup multifamily was built for.
Closing Thought
June clarified the next phase of the cycle. Forward supply is collapsing in the markets that overbuilt, and the construction pipeline that delivers into 2026–2027 is already mostly visible. Transaction liquidity is improving, with pricing beginning to firm at the high end. Tax policy has materially improved after-tax economics for active operators. Rate policy is unsettled, but the bias toward easier money is real.
Our approach has not changed. We continue to pursue stabilized and light-to-moderate value-add multifamily in the Midwest and Southeast, at a basis that does not require macro tailwinds to clear, with capital partners who can move quickly when conviction is high. The next twelve months will produce exactly the kinds of opportunities we have been preparing for.
As always, please reach out with questions or to discuss our active markets and current deal pipeline.
Will Thompson
Founder & CEO, Oakdale Capital
Sources
NAHB, “Sharp Drop in Multifamily Production Brings Overall Housing Starts Down,” June 2025. nahb.org
RealPage / NMHC, “NMHC: Economic Feasibility Improves Somewhat — June 2025 Quarterly Construction Survey,” June 2025. realpage.com
CRE Daily, “Midwest Rents Climb While Sun Belt Markets Decline,” 2025. credaily.com
HousingWire, “Glut of new supply drags down BTR and multifamily rental rates in the Sun Belt,” 2025. housingwire.com
CBRE, “U.S. Multifamily Recovery Continues as Vacancy Rate Falls, New Construction Slows,” April 2025. cbre.com
CoStar Group, “Repeat-Sale Prices Were Mixed Compared to Same Time Last Year,” 2025. costargroup.com
Multifamily Dive, “100% bonus depreciation is back for apartment executives,” July 2025. multifamilydive.com
CNN Business, “Trump sends handwritten letter to Powell demanding ultra-low interest rates,” June 30, 2025. cnn.com
