Debt capital is flowing across the multifamily sector, but equity is proving far harder to secure, creating a bottleneck that continues to slow transactions. That disconnect took center stage at a recent multifamily owners summit, where panelists said a lack of capital does not constrain today’s market, but rather a shrinking pool of deals that can satisfy increasingly selective investors.
Even as lenders compete aggressively to finance deals, equity partners are applying stricter underwriting standards and demanding clearer paths to returns.
During a session on the investment setting, speakers described a market where capital stacks are more difficult to complete, particularly on the equity side. Garrett Karam, chief investment officer at EMBREY, said there is a lot of capital waiting to be recycled, but it’s hard to get deals done because equity is the gating factor.
Karam noted that lenders currently have numerous capital sources competing for business, making it hard to get deals done.
This imbalance reflects broader uncertainty around pricing and returns, which continues to stall investment decisions.
Karam pointed to strong long-term fundamentals for multifamily, with some investors continuing to deploy capital selectively.
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Brian Soss, managing director of acquisitions at RangeWater Real Estate, said that the higher bar is contributing to a growing gap between capital raised and capital deployed.
“People want to put money out and have a lot of capital raised,” Soss said, emphasizing the need for operators to sharpen how they present opportunities.
Traditional value-add strategies are no longer sufficient to win over investors in a crowded and competitive environment, they must learn to storytell.
Soss said, “You have to learn how to storytell, and it has to be more than the traditional, ‘we’re going to change cabinets and flooring,'”
Competition is also intensifying as investors move across the risk spectrum in search of yield, with buyers that historically avoided older assets now actively pursuing them.
While most of the market is grappling with these constraints, some segments are seeing fewer obstacles, such as affordable housing.
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Neal Drobenare, senior vice president of acquisition and development at The NHP Foundation, said affordable housing continues to attract strong demand, particularly in tax-exempt financing structures where capital remains plentiful.
“We have had five times the number of buyers than bonds available in a recent deal,” Drobenare said, highlighting the demand.
That demand has allowed NHP to move quickly, even as conventional multifamily transactions face delays tied to equity sourcing, they are able to capitalize on opportunities.
For most sponsors, access to capital is only part of the equation, as it increasingly depends on how well a deal aligns with investor expectations around risk and returns.
They agreed that debt may be readily available, but equity discipline is dictating which deals move forward.
Until pricing stabilizes and more opportunities meet those stricter criteria, transaction volume is likely to remain constrained, it is a waiting game.
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