The Great Divide: Why Some Apartments Get Built While Others Vanish

CLEVELAND, OH – June 22, 2026 – A stark divergence is cleaving the American housing market in two. On one side, a landscape of stalled projects and abandoned blueprints. On the other, the steady rise of steel and glass. New federal data reveals a market grappling with a crisis of confidence, as U.S. multifamily construction starts plummeted a staggering 40.2 percent in May, hitting a six-year low. Yet, against this bleak national backdrop, a $300 million mixed-use district in suburban Cleveland isn’t just surviving; it's on schedule to deliver nearly 800 luxury homes this fall.

The story of Belle Oaks Marketplace, rising from the ashes of a defunct shopping mall, is more than a local success story. It is a real-time case study in performance and permanence, illustrating a fundamental truth of this economic cycle: the projects that will define our cities for the next decade were decided two years ago. Those breaking ground today face a fundamentally broken equation.

A Tale of Two Timelines

According to the U.S. Census Bureau and the Department of Housing and Urban Development, the annualized pace of new multifamily construction fell to just 295,000 units in May. This dramatic contraction has dragged overall housing starts to their lowest level since the pandemic-induced pause of 2020. For industry analysts, these figures represent a stress test of how high financing costs can climb before development becomes untenable.

For Sterling McGregor, President and Co-Founder of developer DealPoint Merrill, the math is simpler. "We started Belle Oaks when the financing math still worked," he stated. "We are completing it as that same math has broken for projects trying to break ground today."

This is the crux of the great divide. Belle Oaks, a 70-acre district featuring a walkable street grid, a new Meijer supercenter, and 24 acres of green space, secured its financing and began moving earth when capital was accessible and costs were predictable. Its first residential building, offering a portion of the 798 planned luxury units, is set for an October 2026 opening. In contrast, a developer attempting to launch an identical project today would face a brutal financial reality. Elevated interest rates, which the National Association of Home Builders expects to remain above 6% through 2026, have dramatically increased the cost of capital. Simultaneously, construction input prices have surged, with overall costs climbing every month this year.

This environment creates two distinct classes of development: the projects already in motion, and the projects that may never happen. "There is a hard lesson in that about which buildings actually get built in this environment, and which ones stay on the drawing board," McGregor noted. "The developments competing to start now will not deliver for years, if they pencil at all."

The Midwest's Quiet Resilience

While the national picture is grim, the downturn is not evenly distributed. The data reveals a significant regional split that favors the nation's heartland. While the South, West, and Northeast saw new construction starts fall sharply, the Midwest was the only region where overall housing starts actually rose month-over-month, climbing 3.7%. More specifically, while national multifamily starts cratered, the Midwest saw a remarkable 38.7% increase in its annualized rate.

This resilience is not an accident. It is the result of a more balanced economic structure. The Midwest generally offers greater housing affordability, a more stable labor market, and a cost basis that can still absorb some of the inflationary pressures plaguing coastal megaprojects. As single-family homeownership becomes a stretch for many, demand for high-quality rental units in cities like Cleveland remains robust.

"We are building where the cost structure, the labor market, and the demand profile still align," McGregor explained. This alignment is what allows an ambitious project like Belle Oaks—transforming the 55-year-old, shuttered Richmond Town Square mall into a modern, amenity-rich community—to proceed with confidence. DealPoint Merrill is betting on the durability of this regional advantage. "I expect that regional advantage to become a much louder story over the next eighteen months," McGregor added, "and Cleveland's east side is one of the places it will be most visible."

A Scarcity Story for Consumers

The most profound consequences of this construction slowdown will not be felt in boardrooms, but in living rooms. The sharp contraction in the development pipeline is setting the stage for a significant supply squeeze, particularly at the higher end of the rental market.

"The forty percent drop in multifamily starts is not really a real estate story. It is a consumer story," McGregor argued. As the pipeline of new luxury apartments dries up, the few projects that are delivering will command outsized attention and pricing power.

For affluent renters in Cleveland's eastern suburbs—from Beachwood to Pepper Pike—the market is about to tighten considerably. The modern, amenity-rich buildings they would choose to live in are precisely the ones that are no longer being built. Belle Oaks Marketplace, with its private 'Sterling Club' for residents, extensive green space, and integrated retail, will enter the market not just as a new option, but as a scarce one.

McGregor frames the situation bluntly: "Affluent renters in markets like ours are about to discover that the buildings they would actually choose to live in were started two years ago, and there are not many of them. When new supply contracts this sharply, the developments already coming out of the ground are not just early. They are, for a while, the only option."

This dynamic inverts the recent narrative of a softening rental market and landlord concessions. While a wave of completions from projects started in 2023-24 has temporarily increased vacancy, the pipeline behind it is running dry. Once that inventory is absorbed, the underlying strength of projects that demonstrated the resilience to get built will become undeniable, reshaping the rental landscape for years to come.