Freddie Mac projects that the multifamily housing market will see increased financing activity in 2025, but rental property owners should anticipate continued challenges with rent growth and vacancies, according to Freddie Mac’s latest 2025 Multifamily Outlook.

The government-sponsored enterprise, which provides liquidity, stability, and affordability to the U.S. housing market, projects that multifamily originations will total between $370 billion and $380 billion in 2025, up from an estimated $320 billion in 2024. This increase reflects a backlog of postponed transactions, loan maturities requiring refinancing, and stabilization in property values. However, the Freddie Mac report notes that origination volume will remain below the record levels seen in 2021 and 2022. 

Rent growth and vacancy trends 

Rental income is expected to increase modestly in 2025, with rent growth projected at 2.2%, below the long-term historical average of 2.8%. At the same time, vacancy rates are forecasted to rise to 6.2%, exceeding the long-run average of 5.5%. 

In California, the report highlights mixed performance across major markets. 

  • San Francisco is projected to see 3.2% rental income growth, while Oakland and Orange County are expected to experience slower growth at 1.4% and 1.5%, respectively. 
  • Riverside, by contrast, is forecasted to have one of the stronger performances in the state, with rental income expected to grow by 3.1%. 

Financing and market conditions 

Multifamily interest rates remain elevated and volatile, affecting refinancing and investment strategies. Cap rates have been relatively stable, fluctuating within a narrow range of 5.6% to 5.7% for most of 2024, but remain well below the long-term average cap rate spread. This compression has limited price adjustments for rental housing providers considering sales or refinancing. 

Freddie Mac’s report also highlights regional supply differences impacting rent growth. 

  • California markets have lower supply ratios compared to the Sun Belt and Mountain West regions, where new apartment deliveries are at record highs. 
  • Los Angeles and San Francisco rank among the markets with the lowest supply ratios, which could help maintain stronger occupancy rates relative to oversupplied metros like Austin and Phoenix. 

Key takeaways for rental housing providers 

  • Rental income growth will likely be positive but remain below historical trends. 
  • Vacancies are expected to rise modestly, requiring property owners to focus on tenant retention strategies. 
  • Interest rate stability may encourage more transaction activity, though financing costs remain high. 
  • California markets may see relatively stronger occupancy rates due to lower new supply compared to high-growth regions. 

Freddie Mac’s full 2025 Multifamily Outlook provides further details on national and regional market trends affecting rental housing providers.