Multifamily Starts Fell 22.5% the Month Before the Hike

August starts missed at 1.275M; five-plus-unit starts dropped to 344,000 while a D.C. conversion still found $92M.

Key Highlights

• Census/HUD (Sept 17): total housing starts 1,275,000 SAAR in August, down 2.6% from a revised 1,309,000 in July and 1.2% below August 2025; consensus was about 1.31M. Lowest since October 2025.
• Starts in buildings with five or more units fell 22.5% to 344,000. Single-family starts rose 7.6% to 918,000. Permits fell 2.7% to 1,394,000 (up 3.5% y/y); five-plus-unit permits were 467,000.
• Regional starts: Northeast −44.5% to 96,000; Midwest −12% to 198,000; South −1.3% to 658,000; West +32.4% to 323,000.
• Same week: Carr Properties closed a $92M PNC Bank construction loan (United Bank participating; Berkadia arranged) for a 299-unit office-to-residential conversion at 2121 Virginia Ave NW in Foggy Bottom — five-year term, 20-year tax abatement, 30 affordable units, construction starting this month, leasing 2028.
• Census flags the five-plus series as volatile; the July figure was itself revised. Direction is consistent with the last two prints.

The Signal

• Multifamily supply is contracting into the 2028 delivery window.
• What still starts is subsidized, converted, or both.
• Single-family and the West are absorbing the capital multifamily is giving up.

August is the last month of starts data before the Fed hike, and multifamily was already pulling back hard. A 344,000 five-plus rate is roughly a fifth below July and well under the 400,000-plus pace that held through the spring.

The regional split matters for underwriting. The Northeast nearly halved and the Midwest dropped double digits; the West rose a third. Supply pressure is shifting to the markets that were supposed to be supply-constrained.

The Carr loan is the counter-example that proves the rule. A 299-unit start in Foggy Bottom penciled with a 20-year abatement, an office shell, and a relationship bank on a five-year term. Remove any one of those and the deal likely does not start in September 2026.

Completions have been running below starts for most of the year, which means the 2027–2028 delivery cliff is now visible in the data rather than forecast.

For owners of 2022–2024 vintage product, this is the first good supply news in three years. For developers, it is a signal that the next land basis needs a subsidy or a conversion premium to work at a 5% ten-year.

Implications

Multifamily buyers underwriting 2028 rent growth can point to a thinning pipeline, especially in the Northeast and Midwest. Developers should expect lenders to require abatements, conversions, or public capital as a condition of construction debt, not a bonus. Sun Belt and Mountain West markets that saw August starts rise should be underwritten for continued supply, not relief.