The Housing Starts Slump and the Policy Shift Behind It

• Restarting housing starts: Housing starts are down but the Federal Housing Finance Agency has a plan to try to ramp up new development.

• Fly over city: Los Angeles has started developing a network of “vertiports” to support its burgeoning vertical taxi system.

• Undead debt: Debt collectors are resurrecting “zombie” second mortgages that homeowners thought were forgiven.

• Multifamily webinar: Centralization is helping apartment owners cut costs, reduce risks, and improve resident experiences. Sign up

Essential Metrics

The Housing Starts Slump and the Policy Shift Behind It

The housing market has always been a tug-of-war between monetary policy and builder momentum. This summer, that tension hit another milestone. The latest Census data shows that privately owned housing starts dropped to a seasonally adjusted annual rate of about 1.31 million units in August, down 8.5% from July and roughly 6% from a year earlier. It’s the kind of slowdown that doesn’t make headlines in the same way price drops or mortgage spikes do—but for builders, it’s a signal that the supply engine is losing steam again, just as housing demand starts to stabilize.

Single-family starts—about 890,000 units—still dominate construction activity, while multifamily projects (five units or more) came in around 403,000 units. The numbers are telling: multifamily has cooled off from its pandemic-era highs, while single-family builders are struggling with financing, costs, and buyer hesitation. After years of underbuilding, even modest declines like this matter. Each dip pushes the long-running housing shortage further into the future, creating more pressure for policy action.

Bill Pulte, the new Director of the Federal Housing Finance Agency, has made this a major part of his agenda. Pulte comes from a family of developers, his grandfather founded PulteGroup, and has been steering Fannie Mae and Freddie Mac to focus more on the supply side of the housing equation. His team has begun reviewing underwriting flexibility, expanding builder loan programs, and opening new channels for multifamily lending. It’s a shift from the credit-tightening tone of the last few years toward something closer to “pro-builder pragmatism.” The idea seems simple: if homebuilders can’t access financing, it doesn’t matter how much demand there is—supply won’t materialize.

The combination of slowing starts and shifting federal posture could be a defining storyline heading into 2026. Builder sentiment remains fragile, mortgage rates hover near 7%, and construction labor costs continue to climb. Yet, behind the scenes, Washington might finally be creating conditions for a rebound. If Fannie and Freddie become more builder-friendly, they could catalyze not just more projects, but also more institutional interest in development financing—particularly for affordable and workforce housing, where the supply gap is widest.

The latest housing start data may look discouraging, but it’s also a reminder of how deeply policy affects construction cycles. Builders have weathered higher rates before, but they’ve rarely had the ear of regulators. If the FHFA’s approach gains traction, 2025’s slowdown could end up being a recalibration rather than a collapse. The challenge now is making sure the next upturn in housing starts isn’t just cyclical—but structural, too.

Overheard

Dormant Second Mortgages Are Rising From the Dead Risking Property Titles

Old, dormant second mortgages are back and debt collectors are treating them like buried treasure. Firms are now buying “zombie” loans, second liens from the subprime and pre-crisis era that many homeowners believed had been canceled or forgotten, and aggressively collecting. Some homeowners report being blindsided by demands, including interest stretching decades and even threats of foreclosure.

For real estate, the resurrection of these loans injects hidden downside risk into property titles and investor due diligence. Properties thought to be free and clear may still carry latent second liens that can get triggered if a debt buyer wins in court or forces a settlement. In acquisitions, underwriting must now double-check for old, off-book debts. On the homeowner side, equity built over decades may be threatened by claims on what was assumed to be extinguished debt. That’s a structural risk few real estate investors had priced in.

Many of these zombie mortgages were bought for pennies on the dollar, giving debt traders huge potential upside even if they recover only a fraction. If this becomes a business model with scale, markets could see waves of retroactive claims, lingering title defects, or forced buy-outs. For lenders, insurers, title companies, and investors, it’s a reminder that the mortgage record is rarely as clean as it appears and that old liabilities can come roaring back years later.

L.A. Races to Build the First Network of Flying Taxi Vertiports

Electric air taxi operators are moving quickly to stake out real estate in Los Angeles ahead of federal approval for eVTOL (electric vertical takeoff and landing) flights, which could begin as soon as next year. VertiPorts by Atlantic, a subsidiary of Atlantic Aviation, is working with Cushman & Wakefield to identify potential sites for “vertiports” that might occupy rooftops, parking structures, or open land near airports and universities. The company hopes to create a network of 20 to 30 vertiports across the Los Angeles region, targeting areas with dense residential and commercial activity and heavy traffic congestion, like Santa Monica, downtown L.A., and Culver City.

The push comes as major players like Archer Aviation prepare for high-profile events such as the 2028 Los Angeles Olympics, when the first commercial electric air taxi services are expected to debut. These short, 10- to 20-minute flights could link key locations such as SoFi Stadium, LAX, and Orange County, bypassing gridlocked streets and introducing a new dimension of urban mobility. But while the technology and investors are ready, regulatory and zoning hurdles remain a significant obstacle. Cities lack established frameworks for aerial mobility infrastructure, and “flying taxi” use cases aren’t yet accounted for in municipal land-use codes.

If Los Angeles succeeds in launching this network, it could set a precedent for other metropolitan areas facing similar traffic and density challenges. Cities like New York, San Francisco, and Miami—also on VertiPorts by Atlantic’s target list—may soon begin adapting zoning codes, safety standards, and property-use regulations to accommodate urban air travel. For building owners, especially those with underutilized rooftops or parking structures, vertiports could become a lucrative new property asset class—turning airspace into rent-generating real estate and reshaping how urban centers think about vertical mobility.

Are You Enjoying This Newsletter?

Propmodo Daily is written and edited by Franco Faraudo with contributions from readers like you and the Propmodo team.

📧 Forward it to a friend and suggest they check it out.

🔗 Share a link to this post on social media.

🗣 Have ideas for future topics (or just want to say hello)? Share your feedback and tips at [email protected] or connect with us on X through @propmodo.

✅ Not subscribed yet? Sign up for this newsletter here.

📫️ Please add our newsletter email, [email protected], to your contacts to make sure you don’t miss any updates.

Enjoy reading about trends and innovation in commercial real estate? Subscribe to Propmodo.com for unrestricted access to reliable, data-driven journalism and exclusive insights available only to subscribers.