If a company wanted to get a construction loan over the past couple of years, the terms were 65% to 75% loan-to-cost (LTC) and LIBOR plus 225. But as The Dodd–Frank Wall Street Reform and Consumer Protection Act has tightened lending standards, banks are now offering loans somewhere in the range of 55% LTC and LIBOR plus 300 to 350, according to Mitchell Kiffe, senior managing director at CBRE Capital Markets.

“There have been several assignments where banks have passed,” he says. “For the health of the market, it’s a good thing to cut back on supply.”

When banks do lend, the focus seems to be on the best developers. “We expect construction debt to be available, but only for the banks’ best or top-tier borrowers,” says William MacDonald, president and CIO at Dallas-based Mill Creek Residential. “The banks will probably continue to narrow their lending to fewer core borrowers of theirs.”

While debt funds from private equity can fill in the gap for some developers, their cost of capital will rise precipitously. “Private lenders have always been in the space, but now they’re moving to become relevant,” says John Gray, head of investments at Lennar’s LMC. “If you’re a smaller developer and you can’t get a construction loan, you’re willing to pay higher fees and a higher spread to get something done.”

But the election may have changed the dynamic. “[Donald Trump] is anti-regulation,” says David Schwartz, CEO and co-founder of Chicago-based Waterton. “He wants to roll back Dodd–Frank, which could loosen up lending and allow for more development,” he says.

But Gray cautions that the slowdown isn’t just a regulatory story. He says Lennar, which built 4,582 units in 2015, ranking

No. 6 on the 2016 NMHC Top 25 Developers list, will see its starts fall 30% to 35% in 2017. And he expects other major apartment builders to be starting between 50% and 65% as many units in 2017.

“Driving [the slowdown] are the typical midcycle fundamentals issues, where you have rent growth that’s still strong but is slowing down,” he says. “Couple that with land prices and construction costs that continue to grow, and it’s hard to make strong returns work in that environment.”