A good friend of mine used to throw pizza parties at his “fixer-upperia.” Translation: He had just bought a condo and was renovating it, and in return for volunteering manual labor hours, he would feed you homemade pizza. I spent many a Sunday laying hardwood, replacing cabinets, painting crown molding, and changing fixtures—all for a grilled eggplant and mozzarella calzone. Somehow I think I got the short end of that stick.

This was a few years ago, back when his bank was willing to extend him a small loan to cover the cost of the renovation and materials.

Today, I doubt he'd be able to get enough money to cover the cost of pepperoni.

The reality is that construction financing is horrible. Dreadful. Abysmal. There aren't enough synonyms for how bad it is out there.

Granted, we're all latching on to any sign of loosening in the capital markets. And while we have made many strides in the past year, new and value-add development is not one of those areas that has seen a comeback. In fact, I would argue that outside of the Federal Housing Administration, things seem to be flat-out stalled when it comes to financing new projects.

Take the National Association of Home Builders' second-quarter survey of its members. Only 22 percent of developers surveyed said they were shopping for financing. Meanwhile, 63 percent said construction financing was less available. And while that was a lower level than last year's 79 percent of folks who said construction financing was less available, it's still not good.

Some economists would argue this is a good thing. The single-family housing market fell apart because there was a huge imbalance in supply and demand. That's not going to be the case with multifamily.

If things continue as they are—with a huge wave of rental demand looming strong in 2011 thanks to Gen Yers and a lack of new construction— vacancies will remain low while rents continue to rise.

Just consider that in 2009, the industry started fewer than 100,000 multifamily units— less than the natural loss of units annually due to obsolescence and natural disasters.

Lots of new renters plus very little development equals the perfect supply-and-demand equation for an apartment industry comeback. (For more on how demographics, supply, and demand will evolve in the next five years, see “Market Movers” by Jerry Ascierto on page 18.) Now, the devil's advocate in me says that this can't continue.

Limiting our supply will push rents outside the reach of the average renter. It might make owning a home more affordable than renting one, a tricky place that no one in the apartment industry wants to be in. And with very little new stock, we run the risk of allowing aging buildings to form the majority of the country's rental homes.

In a nutshell, it's quite the conundrum to be in. And until construction financing lets up, those who can't build are choosing to buy instead. Which explains why transactional activity has been on the upswing in 2010, with a significant number of large portfolios and one-off properties trading hands in the second and third quarters of the year. It's also why, when we pulled together our annual list of the year's most creative deals (see “Opportunity's (Hard) Knock” by Jerry Ascierto on page 15), we weren't surprised to find projects with inherently creative financing and challenging executions, all delivered by a team of patient investors, lenders, and brokers.

Talk about perseverance finally paying off. And they didn't even need a slice of pizza to get it done.