Commercial Insights

2026 outlook for multifamily and senior housing remains solid

Affordable and senior housing sectors appear poised for continued growth as demand is likely to continue in 2026.

Moving into 2026, multifamily and senior housing remain strong asset classes, despite some headwinds that may carry over from 2025.

The fortitude of these housing categories stems from the need and demand for units, according to Troy Marek, managing director and group head of Real Estate Capital Markets Project Finance for Regions Bank. “As homeownership costs remain elevated, pricing many people out of the market in certain areas of the country, we see people choosing to remain in rental units,” Marek said. “Also, the country’s baby boomer population is driving record demand for units within all core senior housing sub-categories, and the industry is looking for ways to meet that demand and the unique needs of this generation.”

Apartments: A look back at 2025 and ahead to 2026

2025 brought some challenges to multifamily owners. Rents softened following a record surge in new unit supply, interest rates remained elevated in response to inflation and other factors, and transaction volume lagged overall. However, deal upticks occurred, with much of the activity focused on refinance, following the Federal Reserve’s 25-basis-point interest rate cuts in September, October, and December.

In early November, the Mortgage Bankers Association noted that multifamily loan originations increased 12% from the prior quarter and had grown 27% year-over-year. Lending volume for government-sponsored entities (GSE) Fannie Mae and Freddie Mac increased 37% from the prior quarter and 40% year over year. These numbers reflect the key role the GSEs play in financing the apartments sector, along with more significant deal flow in the conventional loan space, where experienced sponsors can source any gaps in the capital stack needed to transact.

Also in November, the Federal Housing Finance Agency (FHFA) announced the 2026 multifamily lending caps for Fannie Mae and Freddie Mac. Each of the agencies received an allocation of $88 billion for a $176 billion combined total, a notable 20% increase from the 2025 caps, which were $73 billion for each GSE, or $146 billion total. As in 2025, the 2026 caps are designed to keep the focus on addressing affordable housing and underserved market needs; 50% or more of the lending activity must be attributed to mission-driven affordable housing (excluding workforce housing loans).

Looking ahead to 2026, loans for affordable housing communities are on the rise, which is noteworthy given the ongoing nationwide shortage in available affordable housing. According to the National Low Income Housing Coalition, the U.S. currently lacks 7.1 million homes to meet demand among renters with extremely low incomes (i.e., at or below the federal poverty guideline or 30% of area median income, whichever is greater). This issue will require new supply and the preservation of existing units – both of which require available financing. With the issue now at the forefront, there are some positive inroads being made at the federal, state and regional levels to incentivize solutions.

Initiatives within the U.S. Department of Housing and Urban Development (HUD) will also make HUD lending a more competitive lending option. Effective October 1, 2025, HUD reduced its Mortgage Insurance Premium (MIP) to a uniform 0.25% for all FHA multifamily insurance programs, with the aim of simplifying costs for developers and expanding rental unit supply. HUD has also made build-for-rent properties eligible for its program financing.

Senior housing trends and the year ahead

Senior housing continues to perform well moving into 2026. Occupancies have grown for 17 consecutive quarters. According to NIC MAP, third quarter senior housing occupancy increased 70 basis points from the prior quarter to 88%. Positive occupancy movement reflects the baby boom generation now moving into senior facilities at an increased rate as their housing needs shift and their care needs increase. A lack of new construction supply has also helped drive up occupancies, making it an area of focus for the industry.

In senior living facilities, many senior communities have begun to shift from offering one level of acuity care to providing many. This continuum of care not only allows more seniors to age-in-place, but it also helps operators retain clientele longer.

The senior housing sector continues to look for ways to better meet the needs of the baby boomer generation, there may be interest among some operators to expand, potentially leading to additional merger and acquisition activity in 2026.

Overall, in Marek’s view, while some challenges from 2025 are likely to persist, both multifamily and senior housing are likely to remain strong asset classes this year – but lenders will need to be nimble and vigilant. “Both housing sectors will need to address strong demand, both will be impacted by any ongoing economic uncertainty, and both will need to address AI-driven opportunities and challenges. The lenders serving apartment owners and senior living operators will also feel these impacts and will be watching any changes that may arise with the GSEs and HUD, as well as any potential banking regulation changes.”

Ready to help

Regions Real Estate Capital Markets offers a comprehensive suite of solutions to meet your commercial real estate financing needs. Contact us to discuss your unique business needs. Our team of trusted advisors is ready to help.