How Financing Restricts the Rental Housing Market

The way apartment buildings are financed has a major impact on supply and costs.

2 minute read

April 16, 2024, 9:00 AM PDT

By Diana Ionescu @aworkoffiction


Four-story light-colored multifamily apartment building.

Sundry Photography / Adobe Stock

In a piece for Strong Towns, Charles Marohn seeks clarity on the many rumors swirling about the U.S. housing market. “If we listen to those concerned about housing affordability, rents are already too high and may only go higher. If we listen to those concerned about housing finance, panic sits just under the surface because rents are about to collapse. Can both of these narratives be true?”

Marohn explains how the way that multifamily residential buildings are financed has a lot to do with rent costs and supply. “The way you make money in commercial real estate today is by leveraging lots of debt. This is one of the reasons that just 25 developers were responsible for one in four multifamily units started in 2022, an astounding level of concentration in a market with over 60,000 developers.”

Marohn notes that the current system of commercial debt worked for property owners and lenders for decades. Now, things are coming to a head. “There are many reasons why there is such hyperventilating over higher interest rates (I mean, we are ridiculously overindebted at all levels of society), but one enormous reason is that it forces the issue on commercial real estate. When the loan is rolled over, the numbers don’t work anymore.”

According to Marohn, it’s possible that lower interest rates made it easier for investors to withhold real, vacant apartment from the market to restrict supply and drive up rents. “If you think building more units in this same top-down, financialized system is going to fix things, you’re stuck in the housing trap. There’s only one way out: a bottom-up revolution in how we deliver lots of units at prices anchored to local capacity.”

Monday, April 15, 2024 in Strong Towns

portrait of professional woman

I love the variety of courses, many practical, and all richly illustrated. They have inspired many ideas that I've applied in practice, and in my own teaching. Mary G., Urban Planner

I love the variety of courses, many practical, and all richly illustrated. They have inspired many ideas that I've applied in practice, and in my own teaching.

Mary G., Urban Planner

Cover CM Credits, Earn Certificates, Push Your Career Forward

Aerial view of town of Wailuku in Maui, Hawaii with mountains in background against cloudy sunset sky.

Maui's Vacation Rental Debate Turns Ugly

Verbal attacks, misinformation campaigns and fistfights plague a high-stakes debate to convert thousands of vacation rentals into long-term housing.

July 1, 2025 - Honolulu Civil Beat

Logo for Planetizen Federal Action Tracker with black and white image of U.S. Capitol with water ripple overlay.

Planetizen Federal Action Tracker

A weekly monitor of how Trump’s orders and actions are impacting planners and planning in America.

July 9, 2025 - Diana Ionescu

Map of Haussmann's redesign of Paris in the 1850s through 1870s under Napoleon III.

In Urban Planning, AI Prompting Could be the New Design Thinking

Creativity has long been key to great urban design. What if we see AI as our new creative partner?

June 30, 2025 - Tom Sanchez

View of dense apartment buildings on Seattle waterfront with high-rise buildings in background.

King County Supportive Housing Program Offers Hope for Unhoused Residents

The county is taking a ‘Housing First’ approach that prioritizes getting people into housing, then offering wraparound supportive services.

4 hours ago - Real Change

Aerial view of suburban housing near Las Vegas, Nevada.

Researchers Use AI to Get Clearer Picture of US Housing

Analysts are using artificial intelligence to supercharge their research by allowing them to comb through data faster. Though these AI tools can be error prone, they save time and housing researchers are optimistic about the future.

5 hours ago - Shelterforce Magazine

Green bike share bikes parked in a row on a commercial street with outdoor dining and greenery.

Making Shared Micromobility More Inclusive

Cities and shared mobility system operators can do more to include people with disabilities in planning and operations, per a new report.

6 hours ago - Cities Today