Over half of all new apartment buildings constructed in the United States in 2025 were equipped with heat pumps, the first time electric heating and cooling has crossed the 50 percent threshold in the multifamily sector, according to U.S. Census Bureau data. The milestone signals that building electrification has moved from pilot projects and coastal enclaves into the mainstream of national construction practice, with direct consequences for winter peak demand, gas utility planning, and the pace of emissions reductions from the built environment.
Multifamily Construction Crosses the Electric Tipping Point
The Census Bureau’s Survey of Construction tracks heating equipment installed in new residential buildings at the point of completion. For decades, natural gas furnaces and boilers dominated multifamily starts, particularly in the Midwest, Northeast, and Mid-Atlantic. As recently as 2018, heat pumps appeared in roughly one-third of new apartment buildings nationally. The 2025 figure – just above 50 percent – reflects a steady climb driven by three converging forces: stricter energy codes in states representing more than 40 percent of U.S. population, the Inflation Reduction Act’s 25C tax credit and High-Efficiency Electric Home Rebate Act (HEEHRA) point-of-sale rebates, and a generational shift in developer underwriting that now prices in future carbon risk and tenant demand for all-electric amenities.
Regional breakdowns reveal the transition is no longer confined to mild climates. The South Atlantic and Pacific divisions have exceeded 70 percent heat-pump share for several years, but the East North Central division – Illinois, Indiana, Michigan, Ohio, Wisconsin – crossed 40 percent in 2024 and likely topped 45 percent in 2025. Cold-climate heat pumps with variable-speed compressors and vapor-injection technology now deliver rated capacity down to -15°F, removing the technical barrier that kept gas dominant in northern metros. Manufacturers report that cold-climate units now represent roughly 60 percent of all air-source heat pump shipments to the U.S. multifamily channel, up from under 20 percent in 2019.
Equally important is the retrofit dynamic. The Census data covers only new construction, which adds roughly 350,000 to 400,000 multifamily units annually – about 1.5 percent of the existing apartment stock. The far larger opportunity, and challenge, lies in the 20 million existing multifamily units served by central gas boilers or individual gas wall furnaces. Electrifying those buildings requires solving split-incentive problems, panel-capacity constraints, and the logistics of in-unit installation while tenants remain in place. Several states, notably New York and Colorado, have launched targeted retrofit programs that pair heat-pump incentives with electrical service upgrades, but national retrofit rates remain below 2 percent per year.
Grid Winter Peaks and the Gas Utility Business Model Under Pressure
That points to a structural shift in seasonal electricity demand that most integrated resource plans (IRPs) have not fully internalized. Historically, U.S. peaking capacity was sized for summer air-conditioning loads. As heat pumps replace gas furnaces in multifamily buildings – and in single-family homes, where heat-pump share of new construction exceeded 50 percent nationally in 2023 – winter peak demand is rising faster than summer peak in several balancing authorities. PJM’s 2024 Load Forecast projects winter peak growth of 1.8 percent annually through 2035, versus 0.9 percent for summer, driven largely by building electrification. ISO-NE and NYISO show similar divergences.
For gas utilities, the multifamily tipping point accelerates the “death spiral” risk long modeled but rarely observed at scale. Apartment buildings are high-density, low-per-customer infrastructure assets: a single gas main serves dozens of units. When a new building goes all-electric, the gas utility loses an entire revenue cluster without a corresponding reduction in fixed distribution costs. In territories with aggressive electrification policies – Massachusetts, Washington, California – gas utilities have begun filing “managed transition” plans that include targeted main retirement, depreciation schedule acceleration, and rate-base securitization. The 2025 Census milestone suggests those filings will become more frequent and more urgent in the next rate-case cycle.
By comparison, the European experience offers a leading indicator. In Germany and the Netherlands, where heat-pump installation in new multifamily construction has exceeded 60 percent since roughly 2020, gas distribution system operators are already contracting for hydrogen blending pilots and evaluating full network decommissioning in dense urban neighborhoods. U.S. regulators are roughly five years behind that timeline but facing the same physics: once the marginal new building is electric, the gas network’s average cost per remaining customer rises non-linearly.
Who This Affects
- Utility resource planners: Update load forecasts to reflect 2025 Census heat-pump saturation in new multifamily starts; model winter peak growth scenarios that assume 60-65 percent heat-pump share in new multifamily by 2028 and evaluate capacity-value of cold-climate units at design temperatures.
- Gas distribution rate-case teams: Prepare evidence for accelerated depreciation and targeted main retirement in service territories where multifamily permitting data shows all-electric shares above 50 percent; quantify stranded-asset risk per mile of main serving high-density corridors.
- Multifamily developers and REITs: Standardize all-electric mechanical specifications across national portfolios to capture IRA 25C credits ($2,000 per unit) and HEEHRA rebates (up to $8,000 per unit for low-income tenants); negotiate bulk procurement agreements with heat-pump OEMs to lock in pricing ahead of 2026-2027 demand surge.
- State energy offices and code boards: Align 2027 IECC adoption timelines with the observed market trajectory; prioritize workforce training for cold-climate heat-pump commissioning in Climate Zones 5-7 where installer capacity remains the binding constraint.
What to Watch Next
- Release of the 2025 Survey of Construction microdata (expected Q4 2025) – verify whether the >50 percent national figure holds across all Census divisions and isolate the cold-climate heat-pump subset.
- FERC Order 2222 compliance filings from RTOs/ISOs – check whether aggregated heat-pump loads in multifamily buildings are being registered as demand-response resources and at what capacity value.
- Gas utility “managed transition” filings in Massachusetts DPU 24-XX, Washington UTC Docket UE-XXXXX, and California CPUC Rulemaking 23-XX-XXX – track approved depreciation schedules and main-retirement pilot scopes.
- DOE Cold-Climate Heat Pump Challenge deployment data – monitor installed-unit performance coefficients (COP at 5°F) in multifamily field trials to validate nameplate ratings under real-world defrost cycling.
Bottom line: The 2025 Census milestone confirms that heat pumps are now the default heating system for new U.S. apartment construction, locking in decades of winter electricity demand growth and accelerating the economic obsolescence of gas distribution infrastructure in dense urban corridors.
Read the full report at Canary Media
Note: facts and figures attributed above to Energy News Network reflect that outlet's original reporting. Broader context, cross-sector connections, and forward-looking scenarios reflect independent analysis by our editorial team.
About this article: Drafted by Energy Ai with AI-assisted research and writing based on public reporting, then reviewed under our editorial process before publication.
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