Multifamily Report 2025: The multifamily market has settled back to a less aggressive pace – May 2025

By Jessica Chevalier

Coming off a year of record new construction completions that stretched into the first two months of 2025, the multifamily housing market is now regulating to normal levels. On the demand side, however, there remains a significant shortage of residences in the U.S., especially at the more accessible levels of affordability. But the fact is that it isn’t getting any cheaper or easier to build, so renting will continue to be the only viable option for many Americans.

ACTIVITY
Last year’s high level of multifamily completions was largely a factor created as the segment attempted to recoup after the Covid-induced recession. Delays amid the pandemic created a surge of activity afterwards. In essence, today’s multifamily market has returned to more normal start and completion levels, notes Steve Kuhel, director of Multifamily Solutions for FEI Group. “The last 18 months were an anomaly,” he says. “One of the concerning things is that only one out of the last 31 months has showed positive activity by architects in the multifamily space, according to the Architecture Billings Index.” As the Index predates flooring installation by at least a year, it indicates a weak outlook for flooring providers serving that market. “No matter what stage-permits or starts or completions-we are seeing seasonally adjusted year-over-year declines,” he adds.

Part of the challenge facing the greater housing market is that many potential homebuyers are trapped, with high rents sucking up their money at one end and elevated interested rates and higher-priced homes requiring larger downpayments inhibiting them at the other. In fact, Kuhel reports that, from prior to the pandemic to today, the average first-time homebuyer age has risen to 38 from 32-an all-time high.

“The affordability issue is something of a waterfall effect,” says Graham Howerton, president of FEI Group. “A new home today is around $400,000, which means you’re looking at a $75,000 to $80,000 down payment. We don’t have historically high interest rates right now, but they are higher than a first-time homebuyers’ parents ever experienced. That’s a high barrier of entry, and it means people aren’t moving out of apartments and into new homes, which impacts the remodel business generated when units turn over.” Fewer relays negatively impact those flooring contractors who focus on such work.

Affordability and interest rates also impact multifamily construction, as rental prices can’t exceed the market rate. “You can’t put an apartment on the market with a rent of $4,000/month, though you might need that break even on your investment,” says Howerton. When these types of market conditions come into play, multifamily construction may grind to a halt.

The current multifamily vacancy rate is sitting around 5.5%, reports Kuhel. “Just before Covid, in February 2020, it was around 5.1%. With all these completions now hitting the market, there could be a slight uptick in apartment vacancies, but that won’t last long. We might see that for three to six months, but it will quickly dissipate.”

Regarding regionality of activity, Kuhel reports that activity with multifamily completions is more centered in the West. Starts are currently more active in the Northeast, and permitting indicates coming activity in the Midwest and South.

BUILD-TO-RENT HOUSING
The ultimate amenity for renters may be space. And that’s one reason the build-to-rent market has found its footing. When renters find themselves at the end of their ropes with apartment-living, build-to-rent homes offer a place for them to call their own-without shared walls, shared green space or the financial burden of home ownership.

The build-to-rent market has seen growth in recent years. While it may offer renters a desirable alternative to apartment living, it may ultimately have a negative impact on the potential first-time homebuyer by driving up the cost of land and resulting in fewer starter homes for purchase. Consider that many build-to-rent developers are large enterprises, some of which are funded through private equity; most private homebuyers don’t have pockets deep enough to compete with developers who can pay cash for the same property.

However, for some communities, the build-to-rent factor could be facing changes. “There are some townships and municipalities that are looking to put zoning restrictions on build-to-rent,” says Howerton.

“That is coming for sure,” agrees Kuhel. “Even with deregulation on building, we will see that.”

FLOORING TRENDS
Historically broadloom and sheet vinyl, the multifamily market fully embraced the LVT trend-for the aesthetics they provide, the longer lifecycle they offer and the ease of cleanability, especially with the rise in renters with pets. For standard properties, gluedown flex LVT is most commonly used, though a thicker LVT or WPC may be selected for more upscale properties.

“Vinyl plank is still winning, but improved vinyl with better performance and cutting-edge style and design,” says Kuhel.

Depending on what happens in the tariff war, the mix could change, notes Kuhel, with broadloom perhaps positioned to have appeal due to its domestic manufacturing.

Of course, domestic producers of LVT are also likely to find themselves in the catbird seat.

“Most flooring suppliers are good at flexing,” says Howerton, “moving up and down with people, capital investment, raw material investment. As to whether 2025 will be a good year for flooring suppliers serving this market, we had a more favorable outlook on the year three months ago. At this specific moment, due to trade policies, everyone has pumped the brakes a little, but it could correct itself quickly.”

He adds, “There is a tremendous amount of flooring inventory and capacity available to serve the market. Now it comes down to where supply partners want to focus their energy.”

“The restraint on the flooring industry isn’t about material but rather about the lack of housing across the board-any type of housing-so any policy restraining supply isn’t good for our industry,” Kuhel emphasizes.

LABOR
Labor shortages prove challenging to the multifamily market, just as they do the residential market and other commercial sectors.

“If we didn’t have so many different constraints on the market-weather, permitting, cost-labor would be twice the issue it is now,” says Howerton. “There isn’t enough labor to do the work we currently have. Take away those barriers, and it will be a glaring issue.”

“Labor is always in the back of my head,” says Kuhel.

Both Kuhel and Howerton advise that commercial contractors serving the space offer top-notch customer service to differentiate themselves in these challenging times.

MULTIFAMILY FLOORING CONTRACTOR PERSPECTIVE
TCC Multifamily Interiors, an FEI member based in Houston, Texas, is a flooring subcontractor for multifamily new construction projects across the U.S.

John-Michael Picard, chief operating officer of TCC, reports that the multifamily market has been evolving over the course of the last five years, moving from construction of workforce housing (affordable for households earning between 60% and 120% of the area median income) to more mid-cost and higher-end styles like podium (four to six stories of wood or CFS construction positioned on top of a concrete structure), wrap (a central above-ground concrete parking structure surrounded by four to seven stories of wood or CFS construction) and high-rise. While he still sees garden-style builds (multiple buildings spread out across one large property with green space) in some areas, the prior options are more suitable for high-density zones.

However, he also notes a countertrend of sorts in large cities such as Austin, Texas and Denver, Colorado, where potential renters are unable to afford higher-end rental properties, creating demand for more affordable multifamily constructions.

Picard reports that LVT plank is the go-to flooring for the multifamily properties TCC works on, with the material extending across living spaces and into bedrooms and bathrooms. There are instances where broadloom is used in bedroom spaces, but primarily only at the most affordable rental levels.

The LVT selected for mid- to upper-tier properties is better and best in quality, reports Picard. Should tariffs make LVT more expensive, Picard believes multifamily developers may be more likely to trade down in LVT quality level in lieu of transitioning back to broadloom. However, he speculates that developers of townhomes, for instance, could utilize hard surface on the first floor and opt for broadloom on the upper levels.

That said, Picard notes that TCC has already moved away from China-made LVT, as have many flooring importers, which may serve as some insulation against tariff-related price increases.

As LVT took share from broadloom, the procurement process for TCC changed significantly. “It used to be that we would do just-in-time delivery, ordering from a manufacturer for delivery just before installation,” Picard explains. “With LVT, we have moved to container purchases.” Buying a container-load enables TCC to get the best price, which is crucial as it allows the company to lock in on a particular material price.

It’s important here to remember that a multifamily flooring contractor that goes under contract in January likely won’t be installing the contracted flooring until between August and December. So, if the firm goes under contract for $1/square foot LVT and the material cost rises to $1.25/square foot in the interim, the cost increase cuts into their margins. Buying container-loads enables them to lock in on a price and have the inventory to support it.

On the remodel turn side, LVT has been something of a negative for flooring contractors, as multifamily developers are no longer turning the flooring between each tenant. And, furthermore, damage to the flooring often doesn’t require a full rip-out but rather lift and replacement of a few planks.

Picard reports that there are quite a few factors that play into what products TCC chooses to invest in. He notes, “In a good-better-best scenario, the ‘good’ doesn’t last as long, so we recommend ‘better’ for its durability. It also comes down to, how quickly can the manufacturer get it to us? Do they stock stateside? And if we need less than a container-load, can we get it?”

Picard believes multifamily activity in 2025 will be essentially flat over 2024. “We have seen the market open up a little bit and expect to see a spike in sales in Q3 and Q4,” he says. “We expect 2026 to be insane on the sales side and 2027 on the revenue front.”

He reports that the greatest challenge TCC faces is delays to the build schedule that result in compression in the late stages of the cycle, when flooring and other finishes are being installed.

From flooring manufacturers, Picard is looking for partners who come through when they say they will come through, as their delays can make TCC look bad. He adds, “Do what you say you will do. Answer the phone, return calls, visit, come through on the promises you make.”

SUPPLIER PERSPECTIVE
Much of the change the multifamily market has experienced with regard to product specification relates to the ways in which multifamily developers balance cost and resident experience, explains Jon England, senior vice president of sales, builder, multifamily and specialty markets for Shaw. “There are different tiers of property managers who want to deliver different things,” he notes. “There are those who are cost-turn focused and, at other end of the spectrum, those leaning heavily into the tenant experience. These differences drive varied product differentiation.”

Understanding the different needs of developers is key to success as a supplier serving this market. “That’s something my team has been pushing into: understanding the needs of not only end-users but the experience they want to provide their renters,” says England. “Has soft moved to hard? Yes. Has sheet moved to click LVT? Yes. Has cost shifted to performance? In some cases. That’s why our approach in understanding what they want to achieve-longer life of product or lowest cost-is valuable.”

To achieve this, England’s team has specialists that call on both groups. He notes, “Many end-users want to have a relationship, so, we’ll have three people sitting at the table, not just two.”

The large-scale change in multifamily priorities has also altered the products England’s team brings to market. “For a long time, multifamily was the cheapest and ugliest, but a good portion of that is now better goods-better performing and better designed,” he says.

Another market change is the fact that many developers today aren’t just focused on design of the units but on design of common spaces, as well. In this, says England, “they aren’t looking for suppliers and commercial contractor partners who are single-faceted, but want partners who do a myriad of things. One big thing they seek is design capability, incorporating interior design of the common space. Offering virtual design has been a big benefit for us.”

One challenge that England faces is identifying partners in each market. One of the largest players in the market, managing 800,000 units across the country, is discretionary, so serving that developer requires establishing relationships with all major commercial players in the markets that it serves.

With the market sluggish at present, England reports that multifamily property owners are focused on renter retention, and flooring is often repaired rather than replaced.

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