Despite rate volatility and policy noise, apartments continue to offer durable value for investors.

You don’t need me to tell you that inflation is still part of every investment conversation. The Fed has now deferred rate cuts in anticipation of clearer signals, and some economists are forecasting stagflation. In this environment, investors typically reassess their portfolios with a focus on stability, yield, and inflation resilience. You can probably see where I am going. Yes, multifamily continues to meet that need. With steady fundamentals, consistent demand, and advantages in lease structure dynamics, apartments remain one of the most reliable inflation hedges in commercial real estate.

Apartments Reprice More Frequently
Multifamily leases typically reset each year, allowing operators to adjust pricing in line with inflation more quickly than other asset types. This inherent ability helps to protect NOI and maintain asset values. Between 1994 and 2022, for instance, apartment rents grew 6% per year during elevated inflation periods, compared with less than 3% in lower inflation environments[i].

Housing Demand Remains Steady
One of the greatest factors impacting multifamily demand is structural affordability issues in the for-sale housing market. As of this spring, buyers must bring an annual income of $114,000 to the table to afford the national median income home price of $431,250 (assuming a 20% down payment and 30-year fixed mortgage). That income is 70% higher than was required in 2019. In this kind of pricing environment, the renter pool has remained larger and more stable than many expected even a few years ago.

Inflation Puts a Damper on New Supply
Construction starts have slowed as elevated costs, market-specific oversupply, regulatory headwinds, and tariffs weigh on new development. This is beginning to translate into reduced delivery volumes. In Q1 2025, fewer than 120,000 units delivered, down from the 2022–2024 quarterly average of 135,000[ii]. Looking ahead, completions in 2025 (536,000) are projected to be 20% lower than in 2024.Material increases in construction costs combined with interest rate volatility are having acute implications on supply growth, as many planned projects have become financially unfeasible, further tightening housing availability and supporting upward pressure on rents.

Favorable Debt Structures
Multifamily investors often benefit from long-term, fixed-rate financing that insulates cash flow from rising interest rates. As rents increase alongside inflation, debt service remains constant, expanding margins and enhancing returns. Additionally, lenders like Fannie Mae, Freddie Mac and HUD/FHA provide liquidity and pricing stability even in volatile capital markets, offering financing advantages (such as 35-plus-year amortizations) that many other asset classes lack.

In an uncertain market environment, multifamily real estate continues to demonstrate its resilience. The sector’s ability to adjust rents in real time, coupled with steady demand drivers, constrained new supply, and favorable debt structures, positions apartments as a reliable inflation hedge and a source of durable, risk-adjusted returns.

[i] “Elevated inflation periods” are defined as “quarters where the annual change in CPI inflation was greater than both the previous five-year annual average and 3%.

[ii] Yardi Matrix.