It’s been hard enough building apartments over the past couple of years. But if you are thinking about an urban infill project? Good luck with that.
“It’s still extremely difficult to develop traditional multifamily infill,” Todd Wigfield, co-head of Greystar’s Americas parent company, told Multifamily Dive. “Medium and high scrambles are very, very difficult to do.”
In the second quarter of 2025, multi-family construction grew in smaller geographies, with gains in all areas except large metropolitan areas, where denser development is common, according to the National Home Builders Association’s Home Builders Geography Index (HBGI).
In the second quarter, the market share of apartment starts in large metro core counties continued a long-term downward trend, falling 12.3% in a four-quarter year-over-year moving average.
New construction in large suburban metro counties and small central metro counties was essentially flat, while large outlying metro areas and small outlying counties saw growth of at least 20% year-over-year.
“Multifamily development in the urban core and inner suburbs continues to be soft, particularly in larger metro areas,” NAHB Chief Economist Robert Dietz told Multifamily Dive in emailed comments.
Math is not done with a pencil
Greystar’s Wigfield said developers have focused on the “outer rings” while prioritizing much-needed affordable and affordable housing. “Trying to really meet the needs of the market and get fundable returns is where we’ve been focused,” he said.
It’s easy to understand why. Bigger, high-dollar deals have lower returns, according to Wigfield. “They tend to be more expensive,” he said. “And so it’s just a big risk.”
Also, it takes a pretty big organization to write the check for $200 or $300 million high-density projects. According to Wigfield, trying to get these types of projects through investment committees has been “extraordinarily difficult” over the past two years.
“We had to look at ourselves as a company and say, ‘Is it worth the risk? Is this what we should be doing at this time in the market? ” Wigfield said.
For a company like Greystar, with a “broad spectrum of investments and markets across the country,” it’s easier to develop other opportunities, according to Wigfield. “When you start looking across the board and level, [high-density development] It certainly didn’t feel like the place we needed to be,” Wigfield said. “And I think a lot of others felt the same way.”
What will high density development bring back?
Part of the reason why high-density development doesn’t make sense right now is the overabundance of projects many meters away. “There were a lot of high-density projects that were delivered in a lot of markets,” Wigfield said.
At least the supply is slowing down. After 10 quarters of over 100,000 units delivered, completions fell to 89,400 units in the fourth quarter of 2025, according to RealPage. But many units still need to be absorbed before the market returns to normal.
“He has to clear more inventory,” Wigfield said. “This has to happen. We have to see a very good stabilization of rents.”
NAHB’s Dietz believes regulatory reform is also needed to incentivize higher-density development. “This could include reforms to parking requirements, permits and impact fees and zoning/permitting rules and processes,” he said.
A group of lawmakers seems to understand these obstacles and is trying to address them with the new bipartisan Build Hubs Actwhich aims to promote the construction of homes near transit hubs throughout the country. Among other changes, it would waive certain requirements of the National Environmental Policy Act for office to residential conversions and infill development.
The subject of demand
In high-density areas, barriers to supply are often cited as bottlenecks. But Dietz also sees demand issues.
“We need to see an increase in hiring, especially for younger people,” he said.
However, the unemployment rate among 16-24 year olds is rising, ending 2025 at 10.4%, up from 9% at the end of 2024 and 8% at the end of 2023, according to LeaseLock chief economist Greg Willett.
Artificial intelligence could increase these percentages even more. For example, Amazon and other tech entrepreneurs they’ve cut jobs and targeted AI as the culprit, according to HR Dive.
“While it’s difficult to determine how much of this increase in unemployment reflects AI’s ability to cover tasks previously performed by entry-level workers, changes in the way business is done appear to have some impact on the numbers,” Willett told Multifamily Dive in emailed comments. “Recent graduates end up living at home with their parents more often than they did a year or two ago.”
If younger people continue to bleed into jobs, apartments of all kinds will take a hit. “Young adults forming new households make a huge contribution to the demand for apartments,” Willett said.
