As property owners face rising borrowing costs and weakening rental markets, a staggering amount of apartment debt is reaching maturity. Nearly $297 billion in multifamily mortgages is due in 2026, constituting around 13% of the $2.3 trillion in multifamily loans monitored by the Mortgage Bankers Association. An additional $223 billion is set to mature in 2027, with similar amounts for 2028 and 2029.
The ramifications of this situation extend beyond just property owners. In areas where landlords struggle to increase rents enough to balance higher financing and operational expenses, it might lead to less cash flow for properties, reduced maintenance spending, property sales, or even defaults.
However, the primary concern might not just be the sheer volume of debt maturing but rather whether properties financed at lower interest rates can continue to support similar borrowing levels in the current market environment.
According to a spokesperson from Trepp, “From our perspective, the volume of multifamily debt coming due isn’t the core issue. The refinance gap is.” Many owners who took on loans when rates were favorable can still manage their interest payments but face difficulties refinancing without contributing significant new equity.
Particularly affected are interest-only and floating-rate loans. Data from Trepp indicated that multifamily commercial mortgage-backed securities (CMBS) delinquency rates increased by 46 basis points to 7.69% in July, as some loans from Ohio, Texas, and New York fell behind on payments.
Moreover, during that same month, Trepp reported that 30 multifamily CMBS loans, worth $509.3 million, became newly delinquent, with many linked to older Sun Belt properties struggling with declining occupancy.
Mike Fratantoni, Chief Economist at the Mortgage Bankers Association, shared that elevated interest rates are just one piece of the puzzle challenging apartment owners. He noted, “In addition [to] the challenge of higher interest rates, multifamily property owners also face challenging fundamentals with flat to declining effective rents in a number of markets, particularly in the sunbelt and elevated vacancy rates.” He also highlighted that rising costs, such as insurance, contribute to reduced net operating income (NOI), which affects property values.
Net operating income refers to the revenue a property generates after accounting for operating expenses but before debt and taxes. A decline in NOI can decrease a property’s value and the amount lenders are willing to refinance.
Fratantoni went on to explain that lenders are expecting more equity in cases where property values have dropped, and they are being meticulous in their evaluations to ensure adequate debt service coverage.
The challenges of refinancing come after the COVID-19 period, when federal eviction moratoriums limited landlords’ ability to evict nonpaying tenants. A 120-day moratorium on federally backed properties was implemented in 2020, followed by a broader one from the CDC that ended in August 2021.
While these moratoriums impacted rental collections, the more pressing issue today is that loans made during the time of lower rates need to be refinanced at much higher costs. This environment also caused some loans, which could have been refinanced, to be extended or modified, resulting in more maturing debt moving forward.
Trepp’s research reflects this gap. In an analysis related to CMBS maturities for the latter half of 2026, roughly 52% of the multifamily balance would require some borrower cash to refinance, and 41% would need an equity injection of at least 20%.
The risk, as identified by Trepp, is notably high among interest-only loans, which do not pay down principal during their terms. Findings indicated that 80% of the interest-only loan balance across various property types would need new equity to refinance.
Add to that, a recent Trepp analysis found that 36% of CMBS hard maturities due in 2026 had debt yields at or below 8%, a factor likely to intensify refinancing challenges.
Ultimately, the impact of refinancing pressures will vary widely across different properties and markets. Trepp mentioned that landlords in areas with substantial new apartment constructions may find it difficult to redirect higher costs to renters, leading to reduced cash flow and cutting back on capital investments.
Fratantoni pointed out that refinancing issues don’t automatically spell trouble for tenants, especially if a property changes hands at a price reflecting the current financing landscape. He said, “If a property gets a new owner, who purchases at the current market value and gets financing at current market rates underwritten to current market conditions, the property, and hence the renters, should be in good shape.”
This situation in commercial real estate unfolds amid high debt levels among households and businesses. By the close of the second quarter, U.S. household debt hit $18.8 trillion, which included about $13.1 trillion in mortgage debt, $1.26 trillion in credit card debt, and $1.71 trillion in auto loans.
Consumer financing in other forms is also rising. The Federal Reserve noted that 16% of adults utilized buy now, pay later options in 2025, up from 10% in 2021, with 26% of those users reporting at least one late payment that year.
Additionally, nonfinancial corporations are also in considerable debt, with their total reaching $15.7 trillion in the second quarter, growing at an annualized rate of 5.5% during that period.
