Slok Warns Higher Rates Could Pressure Housing Supply and Rents

Apollo Chief Economist Torsten Slok warned that high interest rates could slow homebuilding, limit rental supply and add pressure to inflation, as August housing starts and completions fell from a year earlier.

In an Oct. 4 note, Slok described a feedback loop in which elevated rates restrain construction and fewer available homes push rents higher. The housing figures show declines, but do not establish that interest rates caused them or that rents will accelerate.

The Federal Reserve raised its benchmark interest-rate target by a quarter point on Sept. 16, setting a range of 3.75% to 4%. The change took effect Sept. 17. The Federal Open Market Committee said inflation remained elevated in its statement; the statement did not make a housing-specific forecast.

August consumer prices were 3.4% higher than a year earlier. Shelter prices rose 3%, while owners’ equivalent rent, an estimate of what homeowners would pay to rent their homes, increased 3.1%.

August housing starts reached a seasonally adjusted annual rate of 1.275 million, down 2.6% from July and 1.2% from August 2025. August completions reached an annual rate of 1.128 million, 11.9% below July and 27.1% below the year-earlier level.

The figures offer a snapshot of construction and housing costs, while Slok’s warning concerns how interest rates and housing supply may interact. The Fed’s Sept. 16 statement did not forecast that relationship.

Earlier coverage of the Fed’s policy outlook examined projections for another rate increase and elevated Treasury yields.