Will Dip In Apt Construction Lower Rents Prices

Performance Property Real Estate Question

Q: My cousin is a builder and he said he can’t get financing for his latest multi-family projects. Do you think this will have any impact on rent prices? Connie, Yonkers, NY

A: Construction financing has been drying up this year due to several factors including the increasing cost of insurance, building materials and the flattening of rent prices. Consequently, it is increasingly difficult for builders to take on new multi-family apartment projects which has resulted in lower multi-family housing starts this year. The most important factor that influences rent prices is supply and demand so theoretically, a reduction in multi-family construction projects could eventually reduce the overall supply of available rental units and thereby increase rent prices. However, the average construction time for a multifamily housing unit is 2 years, so the effect a reduction in new multi-family projects this year would have on rental housing supply and rent prices would not be apparent until 2025. Thanks for your question, Connie.

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