Real Estate

Multifamily Market Optimism Climbs: Can Builders Overcome Rising Costs and Regulatory Hurdles?

Multifamily market sentiment rose, but occupancy dipped, amid production challenges.

byAndres Castro

November 7, 2025, 2:21 PM

Modern, colorful condominium buildings with curved balconies against a bright blue sky in Miami Beach.

Modern, Art Deco-style condominium buildings stand against a blue sky on Ocean Drive, Florida. By MDL.

Executive Summary

The Multifamily Production Index (MPI) rose six points year-over-year to 46 in Q3 2025, signaling cautious optimism among builders and developers across all four market segments.

Conversely, the Multifamily Occupancy Index (MOI) registered 74, a one-point decrease year-over-year, indicating a slight dip in perceived occupancies for existing apartments.

The market shows a “degree of bifurcation,” with increased optimism for low-rise market-rate and subsidized rental properties, while developers face ongoing challenges from the regulatory environment, rising construction costs, and difficulties in securing project financing.

The Trajectory So Far

The multifamily housing market in Q3 2025 is characterized by a nuanced confidence, with overall production sentiment rising, yet occupancy perceptions slightly declining, a situation largely driven by a bifurcation between low-rise and subsidized rental property developers who are more optimistic, and those facing greater challenges in mid- and high-rise or condominium projects due to persistent issues with the regulatory environment, increasing construction costs, and difficulties in securing project financing.

Assessing Risk and Value

The increase in multifamily production sentiment (MPI) signals potential for new supply and investment opportunities, but a slight decline in occupancy perceptions (MOI) suggests investors should carefully assess local market demand and potential for increased competition. This market bifurcation indicates stronger prospects for low-rise market-rate and subsidized rental properties, while ongoing challenges such as regulatory hurdles, rising construction costs, and financing difficulties present elevated risks and potential margin compression for new development projects across the sector.

Expert Predictions and Forecasts

Builders and developers show cautious optimism for the multifamily housing market, with the Multifamily Production Index (MPI) rising six points year-over-year across all segments, signaling improved sentiment for future production.

The industry perceives a slight decline in occupancies for existing apartments, as indicated by the Multifamily Occupancy Index (MOI) registering a one-point decrease year-over-year.

Experts highlight a market bifurcation, with increased optimism for developers of low-rise market-rate and subsidized rental properties, contrasting with less confidence for mid- and high-rise properties and condominiums due to ongoing challenges like regulatory environments, rising construction costs, and difficulties in securing project financing.

Confidence in the multifamily housing market saw a year-over-year increase in the third quarter of 2025, according to the latest Multifamily Market Survey (MMS) released by the National Association of Home Builders (NAHB). The Multifamily Production Index (MPI), which gauges builder and developer sentiment, rose six points from the previous year to a reading of 46, signaling cautious optimism despite a slight dip in occupancy perceptions.

Multifamily Production Index (MPI)

The MPI, scaled from 0 to 100, reflects current production conditions across various segments of the apartment and condominium market. Gains were observed in all four key market segments: garden/low-rise units rose three points to 51, mid/high-rise units increased nine points to 37, subsidized units climbed nine points to 55, and built-for-sale (condominium) units posted a six-point gain to 35.

Multifamily Occupancy Index (MOI)

Conversely, the Multifamily Occupancy Index (MOI), which measures the industry’s perception of occupancies in existing apartments, registered 74, a one-point decrease year over year. This index is a weighted average of three built-for-rent market segments. Garden/low-rise units saw a one-point dip to 76, mid/high-rise units remained steady at 66, and subsidized units experienced a five-point drop to 81.

Market Bifurcation and Challenges

Debra Guerrero, senior vice president of strategic partnerships and government affairs at The NRP Group and chairman of NAHB’s Multifamily Council, highlighted a “degree of bifurcation” within the market. She noted increased optimism among developers of low-rise market-rate and subsidized rental properties, contrasting with less confidence from those involved in mid- and high-rise properties and condominiums.

Guerrero attributed these challenges to the current regulatory environment, rising construction costs, and difficulties in securing project financing. These factors continue to impact the multifamily sector as a whole, despite the overall rise in production sentiment.

Key Takeaways

The Q3 2025 report indicates a complex picture for the multifamily sector, with production sentiment improving across most segments while occupancy perceptions show a slight decline. Developers continue to navigate significant hurdles, underscoring the dynamic nature of the housing market.