Multifamily Malinvestment and the Skyscraper Curse: Evidence from Five-Star US Development

Austrian business cycle theory (ABCT) holds that artificially low interest rates distort entrepreneurial calculation by making long-duration projects appear more sustainable than real savings and time preferences justify. This article applies that framework to US five-star multifamily development and reframes the skyscraper curse as a testable question about financial pricing rather than only about physical scale. Drawing project-level data from 264 US five-star multifamily developments from Q1 2000 to Q1 2025, excluding 2020 and 2021, this article uses 250 observations in the regression models after removing projects with missing land-value data. The analysis tests whether negative interest-rate gaps at construction start are associated with larger projects or with risk-premium compression from start to delivery. The results do not show that artificially low rates predict greater rentable building area, unit count, or building height. Instead, the evidence is concentrated in financial pricing. Projects initiated during deeper negative interest-rate gaps experience more pronounced compression in the risk premium, defined as the capitalization rate minus the ten-year Treasury yield. These findings refine the skyscraper curse for modern multifamily markets. In this sample, malinvestment is less visible as physical overbuilding and more visible as the underpricing of risk in long-duration real estate projects.