Multifamily Construction: Still Down, but Stabilizing
According to multiple sources, multifamily starts are down 19.7% YTD, with continued decline in May. This was confirmed in a recent ConstructConnect™ report and other various outlets.
Residential sub-trades lost 22,000 jobs over the past 3 months—largely from single- and multi-family activity. From additional sources like NAHB, Redfin, and Zonda, what’s confirmed are that high interest rates, insurance costs, and construction lending limits are constraining new projects—especially market-rate mid-rise and high-rise buildings.
However, affordable housing, tax-credit backed developments, and multifamily retrofits are holding firmer in some metros (e.g., New York, Boston, Philly, LA, Chicago – all markets covered on the Ice Air website here).
What’s Hot in HVAC for Multifamily Projects
Despite fewer new starts, HVAC innovation and investment in multifamily is very active, particularly in retrofits and compliance-driven upgrades. For example, consider the following:
- Electrification / Heat Pump Adoption. Trends include local and state building codes (e.g., New York’s Local Law 97, California’s electrification mandates) are pushing out fossil fuel heating.
- In urban retrofits and new builds alike, cold-climate heat pumps, and packaged terminal heat pumps (PTHPs) are rising in spec frequency. To illustrate, in the 690,000 projects going on right now in the United States, over 22,000 contain such wording in their specifications. Incentives from IRA(Inflation Reduction Act) funds and utilities are accelerating this shift. To illustrate, the multifamily HVAC market is experiencing urgent compliance-driven upgrades due to new refrigerant regulations. Starting January 1, 2025; all new residential air conditioners and heat pumps must utilize A2L refrigerants
- Retrofits & Upgrades for Multifamily Housing – ICAST, with older R-410 refrigerants being phased out. This creates immediate pressure for system replacements, as equipment manufactured prior to this date has a one-year grace period to be installed — a Jan. 1, 2026, installation deadline.
Overall, property owners are racing to beat cost increases, with industry experts warning to act now to avoid paying up to 30% more for your new HVAC system What to Know (and Do) About the 2025 Refrigerant Mandate | Spurk HVAC after the December 2024 deadline.
Finally, NYSERDA and NEEP have launched multiple funding rounds tied to heat pump adoption in multifamily housing. Manufacturers like Ice Air are rolling out next-gen models specifically optimized for apartments and tight envelope design.
Cost Pressures and Value Engineering
Importantly, HVAC remains one of the top three cost targets for value engineering in multifamily, along with envelope and fenestration. This has led to a rise in modular mechanical rooms, plug-and-play rooftop units, and pre-piped HVAC risers in factory-built multifamily components.
For example, in a recent project, the flexibility Ice Air offered when integrating the PTHPs into the wall design is one of the reasons that convinced the engineers and architects on that project to choose their units. Charles Thomson, AIA and LEED AP from CetraRuddy notes. “In fact, at that time, Ice Air was one of the only manufacturers that could meet our design requirements for that component in the podium. This included the longer runs and cold-climate capabilities. We worked with Ice Air on custom sleeves and longer louvers to align with the building’s aesthetic. They were extremely effective.”
77 Commercial, the project, became a model of modern urban development, blending architectural sophistication with cutting-edge HVAC engineering. From its compliance with LL97 to its innovative HVAC solutions to facilitating the integration of mechanical rooms, risers, refrigerant piping within the space constraints, the building addresses the complex demands of New York City’s residential market setting a benchmark for sustainability and design.
Regional Hotspots for HVAC in Multifamily
So where are the “hotspots” for this type of activity?
In the Northeast (e.g., NY, MA, PA), LL97, CHIPs funds for workforce housing, aging infrastructure needing HVAC retrofit are driving the activity. New York City’s construction industry, for example, is poised for significant growth as the city pushes forward with ambitious plans to meet its sustainability buildings goals. Construction is being shaped by stricter environmental regulations, innovative building technologies like heat pumps, and a growing emphasis on energy efficiency. “Our city is leading the way in energy efficiency and sustainability – the expansion of the Demand Response program and the installation of real-time meters in city buildings are vital steps toward a greener, more resilient New York,” said First Deputy Mayor Sheena Wright.
On the West Coast (CA, WA), electrification mandates, smoke/IAQ events driving ventilation upgrades. The construction industry in the San Francisco/Oakland area, for example, is experiencing significant growth, fueled by the region’s strong economy, technological innovation, and commitment to sustainability. As one of the most dynamic urban areas in the United States, the demand for both residential and commercial spaces remains high.
And in the Mid-Atlantic & Midwest (IL, OH), retrofit market driven by IRA incentives and decarbonization goals. Chicago’s construction industry, to illustrate, is entering a promising phase, driven by the city’s efforts to modernize its infrastructure and meet sustainability goals which include reducing carbon emissions by 62% by 2040. As one of the largest construction markets in the U.S., Chicago is seeing increased demand for energy-efficient technologies, especially in the HVAC sector.
Multifamily HVAC Isn’t Slowing—It’s About to Boil Over
While new multifamily starts might be down, the demand for HVAC modernization, electrification, and compliance-ready systems is accelerating—particularly in:
- Retrofit cycles
- Affordable housing
- Emissions-regulated jurisdictions
So, even in a challenging construction economy, HVAC remains hot in multifamily—just not always where you expect. Let us know how Ice Air can help. Check out our NY Central Resource Center for a variety of useful tools and information.