4 ways that recent banking failures will impact the multifamily sector

The recent failures of Silicon Valley Bank and Signature Bank, among others, have rocked the business and real estate lending world. 

The multifamily sector hasn’t been immune from the fallout. Signature was the third-largest lender of apartment loans in New York City. In addition to funding proptech start-ups, SVB also funneled more than $2 billion into affordable housing investments, according to Bloomberg. 

Even apartment executives who don’t work with those banks wonder what’s next. 

“We’ve had two new banks fail,” said Tim Peterson, chief investment officer for Fort Lauderdale, Florida-based developer, builder and manager The Altman Cos. “There were isolated problems of balance sheet management and focus that you can look at and say, ‘This isn’t something that happens to everybody.’ But you absolutely have to have your antenna up.”

As the dust settles, the full ramifications of the banking crisis on the apartment market aren’t fully known and probably won’t be realized until well into the future. But lenders and borrowers in the space have pinpointed four things to watch for.

Pressure on regional banks

In his quest to build 10,000 affordable units, Eddie Lorin is planning to build a project in Las Vegas. But the Alliant Strategic Development founder and CEO is suddenly facing difficulty getting financing.

“One of our lenders told me that there’s no way they were going to fund a $100 million construction loan this year after what just happened,” Lorin said. “They were going to be the land lender and the natural takeout as our construction lender.”

Now, Lorin has to wait out the volatility and find another source, but finding smaller banks willing to make loans could be difficult, according to many observers. “I think there is going to be less capital available from smaller banks that were funding a lot of real estate transactions,” said Ross Pemmerl, chief credit officer at UC Funds, a debt provider whose specialty is bridge loans.


“The halcyon days of every deal getting financed on the most aggressive terms possible are over.”

Tim Peterson

Chief investment officer, The Altman Cos.


After the collapse of SVB and Signature, rating agencies like Moody’s flagged potential issues at smaller banks. With regulatory and political scrutiny on small and mid-size banks increasing, Lorin thinks more will pull away from the apartment market. 

Others agree. “The regional banks provide significant support liquidity to the apartment sector, particularly here in New York, with Signature providing $4.4 billion in multifamily lending last year,” said Michael J. Hurley Jr., managing partner of New York–based law firm Cassin & Cassin LLP. “So I think you’re going to see a bit of a pullback from regional banks providing loans to the multifamily sector.”

Development concerns

Any small bank slowdown could impact apartment executives across the board, but developers, as Lorin’s example showed, could be most exposed. “I see [things slowing down] more in construction lending and value-add renovation dollars,” Pemmerl said.

Even if smaller banks are making construction loans, they’re not getting very aggressive in this environment, according to Peterson. He said a lender recently told him that it originated enough loans in 2021 and 2022 to get its required returns. As it result, it didn’t need to be as aggressive in 2023.


“You’ve got approximately $25 billion of maturing multifamily securitized loans maturing in ‘23.”

Michael Hurley

Managing partner of New York–based law firm Cassin & Cassin LLP


“The halcyon days of every deal getting financed on the most aggressive terms possible are over,” Peterson said. “We’re returning to the days where there is traditional underwriting and banker skepticism.”

On the affordable side, where developers need their financing lined up to get tax credits, the banking issues could hit especially hard. “If you’re competing with tax credits, unless you have everything buttoned up and tied up, it’s going to be scrutinized more,” Lorin said.

CMBS volatility

Although the larger multifamily market didn’t see volatility in the days after the bank collapse, the commercial mortgage-backed securities and collateralized loan obligation markets experienced some turbulence. ”The first quarter has seen some of the lowest activity in the CMBS/CLO market I can recall, which we attribute to rising interest rates and volatility in CRE valuations,” Pemmerl said. “This combination of interest rates and market uncertainty results in investors requiring larger spreads, pushing underlying spreads, in turn squeezing returns.” 

The volatility in the securitized world matters to a new crop of lenders that have emerged over the past half-decade.