Author: Multifamily News

Multifamily Absorption Remains Strong

Apartment demand topped expectations in the first half of 2026, with net apartment household formation topping 250,000 units, according to CoStar and Real Page. That’s among the highest absorption starts in history, and it’s better than any year before 2020.

With supply dropping off concurrently, absorption topped supply by about 100,000 units so far this year, reversing a long trend of ultra-high supply topping strong demand. That triggered occupancy growth of 20 basis points in the first quarter of 2026, which was the best for any quarter since 2021.

The absorption trends so far this year are a possible sign that at least one segment of consumers is faring better than generally perceived, especially when these new renters are spending only 21-22% of income toward rent.

Source: Jay Parsons

Historical Multifamily vs. Assisted Living/Memory Care Cap Rates

Assisted Living and Memory Care properties have always traded with a cap rate spread above multifamily. Why?

Operating Business Risk

  • An apartment is a passive real estate asset; assisted living/memory care is a healthcare-adjacent operating business inside real estate. Buyers underwrite the operator as much as the building, and NOI can swing dramatically based on management quality.
  • Operator dependence creates transition risk — replacing an underperforming operator is far more disruptive than swapping property managers on an apartment deal.

Labor Intensity

  • Labor runs roughly 55-65% of operating expenses in AL (higher in memory care) versus ~25-30% for multifamily, so wage inflation, caregiver turnover, agency staffing costs, and staffing regulations hit NOI directly.
  • The caregiver labor pool is structurally tight, and owners have limited ability to control that cost line.

Resident Turnover Economics

  • Average length of stay is only 18-28 months in AL and roughly 18 months in memory care, versus 2-3 years for apartment tenants — meaning 40-60% of the rent roll must be re-leased every year just to hold occupancy flat.
  • Move-outs are driven by health decline or death rather than lease expirations, and move-ins depend on emotionally difficult family decisions, making census harder to predict and market.

Regulatory and Licensing Exposure

  • Communities are state-licensed and subject to surveys and inspections; a deficiency citation can damage reputation and census in ways multifamily never faces.
  • Regulations (staffing ratios, care requirements) can change and compress margins with no offsetting revenue.

Liability and Litigation Risk

  • Resident acuity creates negligence and wrongful-death exposure, especially in memory care, driving higher insurance costs and legal risk.

Thinner Capital Markets

  • The buyer pool is smaller and more specialized than multifamily’s, reducing exit liquidity.
  • Debt is less abundant — multifamily enjoys deep, consistent GSE support, while senior housing financing is narrower and more sensitive to credit cycles.

Higher Expense Loads and Margin Sensitivity

  • Food service, care staff, transportation, and activities create a heavier expense structure, so a small revenue miss translates into a larger NOI miss than in multifamily.

Segment Risk Premium Scales with Care Level

  • The market prices this explicitly: active adult trades nearly on top of multifamily, independent living slightly wider, assisted living wider still, and free-standing memory care widest (~9.5%+) — the more care in the model, the bigger the spread.

Immigration’s Impact On Housing & Wages

Some highlights from a recent working paper from the Federal Reserve titled: The Impacts of Unauthorized Immigration on U.S. Labor and Housing Markets: New Evidence from Administrative Microdata

From early 2021 to early 2024, the U.S. experienced an unprecedented boom in unauthorized immigration, followed by a rapid slowdown beginning in mid-2024.

Employment Growth: Unauthorized immigrant workers boosted local employment numbers on a roughly one-for-one basis. The surge accounted for roughly 30% of local employment growth in the average metropolitan area.

Wages: Researchers found no evidence that the sudden influx of workers lowered average local wages. However, the report did note a decrease in labor income per capita. This happened because the new workers generally filled lower-wage jobs, shifting the overall workforce average.

Housing Impact: Because the housing supply could not expand fast enough, the surge acted as a major housing demand shock. This influx explained about 30% of home-price growth and 20% of rent growth in the average metropolitan area between March 2021 and March 2024. A 1% increase in unauthorized worker inflows was associated with approximately a 2.2% increase in home prices and about a 1.4% increase in rents.

The Under-18 Population Is Decreasing Everywhere, Except The South

Most of America is preparing for fewer students and young families, while the South faces the opposite problem: crowded classrooms and new housing needed.

The South’s overall growth reflects strong migration patterns that are adding children, people in prime family-building years and retirees — making it the only region gaining population across all five age groups tracked by the Census Bureau.

Source: Axios

Non-Homeowners Plan To Rent Longer, Or Forever

Over the last decade, the share of young non-homeowners saying they will not buy a home in the foreseeable future has more than doubled, from 13% to 30%.

The share expecting to buy within 10 years has risen from 27% to 41%, suggesting younger non-homeowners are pushing their timeline out significantly.

Only 29% say now is a good time to buy a house, while 67% say it is a bad time.

65% expect prices in their area to increase over the next year, up eight percentage points from 2025.

22% of U.S. adults believe prices will stay the same and 12% think they will fall.

Source: Gallup

Multifamily Starts Plunge In May

Multifamily starts dropped an incredible 41.6% from April’s revised figure to 284,000 units in May, according to the latest data release from the U.S. Census Bureau and the Department of Housing and Urban Development. That annualized figure is also down 12.3% from last May.

Annualized multifamily starts increased sharply in the small Northeast region (up 70.5% to 56,000 units) and were up 38.7% in the Midwest region to 58,000 units. The South region’s multifamily starts decreased 51.3% to 81,000 units, while the West region saw starts increase modestly (7.6%) to 88,000 units.

Source: RealPage

Multifamily Concessions Continue To Rise In The Sunbelt

The number of communities offering concessions remained steady at 16.9% in May 2026. While unchanged month-over-month, this concession activity marked a 4-point increase year-over-year and remains near the highest average level of monthly concession activity since mid-2014 (blue bars below).

The average concession (black line below) decreased 0.1 point on a monthly basis to 10.9% in May 2026. While that was a mild dip, it marked the first monthly decline in average concession amounts since March 2024.

Still, May’s 10.9% reading was up 1.7 points year-over-year and translates into nearly six weeks free on a 12-month lease. Overall, U.S. concessions have generally trended upward since reaching a decade low of 5.5% in mid-2016 and remain near their highest level since the post–Great Financial Crisis period (2010).

Overall concession use was once again led by the high-supply South at 22.1%, up 0.3 points month-over-month. 

Source: RealPage