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June 2026: Declining starts & deliveries ahead
The high level of U.S. affordable housing deliveries seen over the past several years will decline as starts decelerate in the face of challenging market conditions. A new national report from Yardi Matrix outlines the challenges current market conditions pose to the financing, approval and construction of affordable housing units.
Deliveries slide from 2024 peak
After five consecutive years of increased affordable apartment deliveries that peaked in 2024, deliveries fell by almost 8% in 2025, which was still the second-highest total in the market’s history. But today, rising construction costs, labor shortages and local compliance requirements combine to cut starts of fully affordable housing by 5.2% year over year in 2025, with the loss continuing in 2026, which saw fully affordable starts drop almost 20% year over year in Q1.
That means deliveries, which totaled 91,841 units in 2025, will fall to 90,476 this year, followed by an average of 74,000 units per year in 2027 and 2028.
Market conditions pose multiple challenges
Similar to their market rate counterparts, affordable housing projects are facing less favorable conditions, as “higher construction costs, elevated interest rates and declining tax credit pricing have altered the economics of affordable housing development,” the new national report says.
Furthermore, the report adds, “approval timelines remain extended in many high-cost markets, while funding programs and allocation processes can introduce additional uncertainty.”
New report provides insight
“The question going forward is how much increased funding and legislative efforts by states to reduce barriers to affordable housing construction will be offset by market conditions that have contributed to the drop in housing starts,” the report says.
Get insights into how this question will resolve in the Yardi Matrix Affordable Housing National Report for June 2026.
April: The impact of targeted tax incentives
A new report from Yardi Matrix examines the impact of tax incentives on the prospect of expanding the supply of affordable housing in the U.S.
Federal housing policy incentivizes private developers to build and preserve income-restricted housing via the Low-Income Housing Tax Credit (LIHTC) program. The Yardi Matrix analysis illustrates how the differences between affordable and market rate rents drive decision-making about housing development and preservation.
Analysis provides insights for housing investments
“Examining rent relationships between affordable and market rate housing provides insights into when and where affordable housing investments may be most effective,” the report states. “Understanding these competitive environments is particularly important for policymakers that allocate scarce housing resources” for new supply and preservation of existing affordable housing stock.
DDA & market rate rental environments
The Yardi Matrix report addresses the affordable housing environment both within and outside of Difficult Development Area (DDA) tracts, an LIHTC designation intended to facilitate housing development where cost or income conditions tend to hinder development. In analyzing rents of affordable and market-rate properties, Yardi Matrix found that:
- Market rate properties directly compete with fully affordable developments in many non-DDA tracts, often targeting the same pool of tenants
- National market rate advertised rents in DDAs grew by 32.8% from 2016 to 2025
- Rents outside DDAs grew by 49.2% in the same period, remaining 28% lower than DDA rents
- In non-DDA tracts, particularly in fast-growing Sun Belt metros and some Midwest markets, affordable rents are near market rate rents
- Older market rate inventory functions as a critical source of naturally occurring affordable housing
See other insights from the Yardi Matrix dataset comprising approximately 120,000 multifamily properties including over 26,000 fully affordable properties with more than 3 million units.
February 2026: NOI topped market rate sector in ’25
Fully affordable properties bested the market rate apartment sector in income and net operating income in 2025, a new Yardi Matrix report documents.
U.S. affordable housing’s average income growth measured 5.7% in 2025, well above the 2.1% increase recorded for market rate properties. That helped drive net operating income up 8.7% for the year, versus 2.2% for the market rate sector.
HUD allowable rents increase
The U.S. Department of Housing and Urban Development formulas that govern affordable housing rents increased more than usual in 2024 and 2025 to accommodate post-pandemic inflation and wage growth, a key contributor to the sector’s income performance.
More than 70% of areas across the HUD universe were allowed to raise rents by 5% or more; the highest rate was 9.2%.
Expense increases moderate
Affordable property expenses rose an average of 3.3% per unit in 2025, down from the 7.8% peak measured in 2022 and 2023. While expenses for marketing, repairs, maintenance, utilities experienced above average growth in 2025, insurance and taxes rose less than 1% per unit. Higher premiums in previous years, a decline in large payout events and various tax reduction actions by property owners accounted for lower expense growth in these categories.
Get the full story
Get in-depth analysis of income, operating expenses, NOI and other trends in the Yardi Matrix Affordable Housing National Report for February 2026.
January 2026: Tax policy emphasizes development incentives
Geographically targeted tax incentives will play a prominent role in promoting affordable housing development, according to a new national report from Yardi Matrix.
For example, the Opportunity Zones program, which offers tax incentives for development in low-income submarkets, received a long-term extension in 2025. Also last year, Low-Income Housing Tax Credit allocations were expanded by 12%.
These federal actions, along with measures that enable developers to raise more LIHTC equity for projects in Difficult Development Areas, where costs for land and other resources are high relative to the area median income, “aim to improve project feasibility in underserved or high-cost environments,” the report notes.
While the impact of such factors as interest rates and capital and construction labor availability remain to be seen, “the combined weight of federal and state support positions the multifamily sector for a decade of elevated activity,” according to Yardi Matrix, which projects that the LIHTC program will deliver nearly 215,000 units over the next three years.
Incentive program facts
- The Low-Income Housing Tax Credit program has been responsible for more than 3.5 million affordable units since its inception in 1986. The legislation that created LIHTC also designated Difficult Development Areas.
- There are 4.1 million units in Difficult Development Areas and 2.3 million units in Opportunity Zones, which was created in 2017 as part of a tax reform package. Of the total, 5.1 million units are market rate and 1.3 million are fully affordable.
- The 348,000 combined Opportunity Zone and Difficult Development Areas units under construction represent 5.4% of total in-place stock. The fully affordable units under construction would add 6.9% to DDA stock and 5.5% to Opportunity Zone stock.
Get the full story
Read about how Opportunity Zones and Difficult Development Areas align capital with affordability needs in the January 2026 Yardi Matrix National Affordable Housing Report.
