A simple reason it’s getting harder to build rental housing

Rental housing construction is slowing down in the United States. The cost of common construction materials is a big reason why.

According to a new report from the Joint Center for Housing Studies of Harvard University, construction material costs have skyrocketed in recent years, adding to a wide range of conditions that are slowing the production of rental housing.

The report, “America’s Rental Housing 2026,” finds that there was a 42% increase in the overall material costs of multifamily residential construction over the five-year period from 2020 to 2025, covering essential building materials like gypsum board, ready-mix concrete, and lumber. It’s a huge jump in costs compared with the previous five-year period from 2014 to 2019, which saw construction material costs rise just 7% overall.

“The cost rose a lot following the pandemic. And some of that was supply chain issues that really increased the costs, and then they didn’t quite come back down. And now tariffs are also impacting some products,” says Whitney Airgood-Obrycki, a senior research associate at the Joint Center for Housing Studies and the lead author of the report.

These costs are part of the reason the amount of new rental housing stock is shrinking. According to the report, 416,000 multifamily units were started in 2025, down from a 30-year record high of 547,000 starts in 2022. Year over year, fourth-quarter starts of new professionally managed apartments dropped 36% in 2025.

The raw materials of housing construction heavily influence the overall cost of housing production, and the past five years have seen material costs spike. Five major categories of building materials—gypsum, plastic construction products, lumber and wood, ready-mix concrete, and brick and structural clay tile—have experienced cost increases of between 26% and 47%.

The high material costs have contributed to the slowdown in overall rental housing production, but they’re only part of the picture. Airgood-Obrycki notes that there’s been a labor supply shortage in the construction industry over the same five years, and labor costs in the industry have increased by 24%. High inflation is affecting what people in the housing market can afford, and high interest rates are limiting what developers can afford to build.

“There are lots of things happening at the same time,” Airgood-Obrycki says. “The long-standing issues of the high cost of land and issues with delays in development and with a complicated permitting process in some places are also adding time and cost to projects for developers.”

Most of the impacts from construction material costs are a direct and long-lingering result of the pandemic, according to the report, but current affairs—from tariffs to oil price shocks from the Iran war—are also having an effect on the overall cost of building.

“The tariffs, of course, are adding more on top of that and preventing prices from coming back down in any real way,” Airgood-Obrycki says.

For potential renters, that likely means less housing to choose from and potentially higher rents in the long term.