2025 Housing Starts Drop 7%, Builders Target Mixed-Density Housing to Tackle Affordability – Thursday, February 19, 2026

Housing starts in 2025 declined by 7%, reflecting significant challenges in the residential construction market. Despite this downturn, builders are optimistic about a rebound, focusing on mixed-density housing as a key strategy to address ongoing affordability issues.

Who should care: city planners, smart city program managers, real estate technology leaders, mobility operations teams, and urban infrastructure decision-makers.

What happened?

In 2025, housing starts dropped by 7%, signaling a notable slowdown in new residential construction projects. This decline highlights persistent challenges in the housing market, with affordability remaining a central concern. Rising construction costs, labor shortages, and regulatory hurdles have compounded these difficulties, making it harder for developers to initiate new projects. However, amid these challenges, builders are increasingly turning to mixed-density housing as a promising solution. This approach blends single-family homes, townhouses, and apartments within the same development, aiming to diversify housing options and improve affordability. Mixed-density developments are gaining momentum as cities seek to accommodate growing populations without expanding urban sprawl or overburdening infrastructure. By integrating various housing types, developers can create more inclusive communities that better reflect residents’ diverse needs and income levels. This shift also signals a broader change in urban planning and real estate development strategies, emphasizing efficient land use and affordability over traditional single-use zoning. As affordability pressures reach a tipping point, mixed-density housing emerges as a critical tool for cities and developers striving to balance growth with livability.

Why now?

The urgency around mixed-density housing stems from a growing recognition that current housing prices have become unsustainable, outpacing wage growth across many regions over the past 6 to 18 months. This widening affordability gap has intensified calls from policymakers and developers to explore alternative housing models that can better meet demand. The 7% decline in housing starts in 2025 underscores the market’s struggle to keep pace with these needs, reinforcing the imperative for innovative solutions. Mixed-density housing offers a timely response by enabling more flexible, cost-effective development patterns that can help stabilize prices and increase supply. As urban areas grapple with limited land availability and rising costs, this approach provides a practical pathway to expand affordable housing options while maintaining community cohesion.

So what?

The pivot toward mixed-density housing represents a strategic evolution in urban development, balancing affordability with sustainable land use and community design. For real estate developers, this trend opens new avenues for innovation in project planning and construction, encouraging diverse housing portfolios that appeal to a broader market. City planners and smart city program managers must now consider how these developments integrate with existing infrastructure, transportation networks, and public services to ensure cohesive urban growth. Mobility operations teams should anticipate increased demand on transit and road systems in areas experiencing mixed-density expansion, requiring proactive planning to maintain accessibility and efficiency. Ultimately, embracing mixed-density housing can help alleviate affordability pressures while fostering more vibrant, inclusive urban environments.

What this means for you:

• For city planners: Prioritize zoning reforms that enable mixed-density developments to enhance housing affordability and diversity.
• For real estate developers: Seek partnerships and leverage incentives to accelerate mixed-density projects that meet evolving market demands.
• For mobility operations teams: Prepare for increased transportation needs in neighborhoods with new mixed-density housing, adjusting service plans accordingly.

Quick Hits

• Impact / Risk: The 7% decline in housing starts highlights the risk of a prolonged affordability crisis without targeted strategic interventions.
• Operational Implication: Developers and planners must adapt to emerging housing trends by focusing on mixed-density models to align with market realities.
• Action This Week: Review zoning regulations for flexibility in mixed-density projects; update stakeholders on market shifts; assess transportation plans to support new housing developments.