In this brief, we describe challenges faced by small or emerging multifamily housing developers, who, when operating at scale, can play a crucial role in expanding housing supply. We explore the steps and complexities of developing multifamily housing, the obstacles disproportionately faced by smaller developers compared with larger firms, and the practical strategies and policy solutions that can help these developers overcome financial, procedural, and market hurdles to grow their businesses and contribute more effectively to housing development.

Why This Matters

Small and emerging multifamily developers can be vital to increasing housing supply, but they face disproportionate financial, operational, and regulatory barriers. This brief highlights solutions that can be implemented by policymakers, community organizations, and investors aiming to expand the number of players in housing development and address systemic disparities in the real estate industry.

Key Takeaways

Small and emerging multifamily developers can face significant challenges that limit their ability to scale and contribute to housing supply. Key findings include the following:

• High up-front costs and limited liquidity hinder early project stages, with small developers often lacking the equity or investor networks needed to cover expenses before construction begins.
• Complex zoning and permitting processes create lengthy delays and require costly legal support, disproportionately affecting smaller firms without established relationships or in-house expertise.
• Financial barriers are compounded by wealth disparities, as developers of color and women face greater difficulties accessing capital and informal networks critical for dealmaking.
• Smaller developers struggle to manage risk because they have fewer simultaneous projects, limiting their ability to absorb delays or cost overruns.

To address these issues, developers can adopt strategies such as sweat equity, partnerships with local governments and community organizations, and revenue-sharing with established developers. Policy solutions like equity grant programs, credit enhancements, capacity-building initiatives, and accelerated permitting processes can help developers break the cycle of thin pipelines and enable them to grow sustainably, ultimately expanding housing opportunities.

How We Did It

This research is based on three rounds of semistructured interviews conducted between 2022 and 2024 with 39 multifamily developers, along with 20 interviews with representatives from banks, community development financial institutions, equity investors, and government agencies. Additionally, we gathered insights from a January 2024 roundtable discussion with 32 stakeholders across housing development, finance, government, philanthropy, and research sectors.