The Federal Reserve's July 2026 Senior Loan Officer Opinion Survey on Bank Lending Practices reports that banks left construction and land development (CLD) loan standards basically unchanged in the second quarter of 2026 while reporting weaker demand for those loans. Over the same period, banks eased standards for nonfarm nonresidential and multifamily lending (Board of Governors of the Federal Reserve System).

The more consequential finding is in the survey's special questions: a significant net share of banks reported that CLD standards remain at the tighter end of the range they have used since 2005 (Federal Reserve). Standards are not tightening further — they are simply sitting at a restrictive level, which is a very different thing from normalizing.

What the Survey Found

The July 2026 survey was sent to respondents on June 17, 2026, with responses due July 2, 2026, and covers 56 domestic banks and 18 U.S. branches and agencies of foreign banks. It was prepared by Luke Morgan of the Federal Reserve's Division of Monetary Affairs and released in early August 2026 (Federal Reserve).

By commercial real estate category for the second quarter of 2026 (Federal Reserve, SLOOS Table 2):

• Construction and land development: standards basically unchanged on net (a 0 to 5 percent net share); demand weaker by a moderate net share
• Nonfarm nonresidential: standards eased by a moderate net share (10 to 20 percent); demand basically unchanged
• Multifamily: standards eased by a modest net share (5 to 10 percent); demand basically unchanged

Bank Size Is the Dividing Line

The survey found a clear split by lender size. Large banks — those with $100 billion or more in domestic assets as of March 31, 2026 — eased standards across all commercial real estate categories and reported stronger demand. Other banks reported standards and demand basically unchanged or weaker (Federal Reserve).

Meanwhile, a moderate net share of foreign banks tightened commercial real estate standards but reported stronger demand (Federal Reserve).

The survey's chart data puts precise numbers on the quarter: a net 4.9 percent of domestic respondents tightened construction and land development standards, while a net −11.7 percent reported stronger demand — meaning demand weakened. Nonfarm nonresidential standards showed a net −3.3 percent tightening, or a slight easing, with a net 3.3 percent reporting stronger demand, and multifamily standards were flat at 0.0 percent with a net 3.3 percent reporting stronger demand (Federal Reserve, SLOOS chart data).

For developers, that composition matters more than the aggregate. Most mid-market construction lending in Upstate New York and comparable regional markets comes from banks well below the $100 billion threshold — the group reporting no easing.

Why It Matters to Construction Professionals

Construction and land development lending is the front end of the private nonresidential and multifamily pipeline. If CLD standards remain at the tighter end of a 20-year range, several practical consequences follow.

Equity requirements stay elevated. Tight standards typically show up as lower loan-to-cost ratios, more required pre-leasing, tighter debt service coverage tests, and more personal or corporate guarantees. Developers respond by shrinking projects, phasing them, or shelving them.

Weaker CLD demand is partly a symptom, not just a cause. When a moderate net share of banks report weaker demand for construction loans (Federal Reserve, SLOOS Table 2), some of that reflects sponsors declining to apply on available terms rather than an absence of projects. That helps explain why building permits can rise while starts fall — entitlement is cheap relative to construction debt.

The easing in completed-property lending is real but downstream. Eased standards on nonfarm nonresidential and multifamily loans (10 to 20 percent and 5 to 10 percent net shares respectively) primarily help refinancing and acquisitions of existing buildings, not ground-up work (Federal Reserve, SLOOS Table 2). It improves exit financing for projects that get built, which supports underwriting at the margin.

Implications for Owners, Developers, Contractors and Subcontractors

For developers, the actionable read is to widen the lender search beyond regional relationships. With large banks easing and reporting stronger demand while smaller banks hold firm (Federal Reserve), a project that fails at a community bank may pencil at an institution above the $100 billion threshold — or with a debt fund or life company. Sponsors should also be prepared to show more pre-leasing and more equity than they needed in 2021 or 2022.

For general contractors, the credit environment is a direct input to backlog quality. A signed contract from a sponsor without a closed construction loan is not backlog; it is a bid. Contractors should be asking about financing status, loan closing timelines and equity sources before committing crews or buying out subcontracts, and should think carefully about how much preconstruction work to perform at risk.

For subcontractors, tight CLD credit raises payment risk on private ground-up projects. Practical protections include mechanic's lien discipline, joint check agreements where appropriate, careful attention to pay-when-paid language, and preference for projects with institutional lenders or public funding sources.

For owners with existing assets, the easing on nonfarm nonresidential and multifamily standards is a genuine opportunity to refinance or recapitalize — potentially freeing capital for capital improvements and tenant work that does not require construction financing (Federal Reserve, SLOOS Table 2).

What to Watch Next

The SLOOS is quarterly, so the next edition will cover third-quarter 2026 conditions. The specific things to look for:

• Whether CLD standards begin to ease rather than merely stop tightening. A shift from "basically unchanged" to a net easing share would be the first credible signal of a private construction recovery.
• Whether the large-bank versus smaller-bank divergence persists. If it does, market share in construction lending will keep concentrating, which changes who developers need relationships with (Federal Reserve).
• Whether CLD demand stabilizes. Demand recovering while standards stay tight would suggest sponsors are accepting the current terms — a precondition for starts to catch up with permits.

The full survey and its data tables are published by the Federal Reserve (Federal Reserve).

Bottom Line

Banks are not tightening construction credit further, but a significant net share report that construction and land development standards remain at the tighter end of anything they have used since 2005, and CLD demand weakened again in the second quarter of 2026 (Federal Reserve). Easier lending on existing nonresidential and multifamily properties helps exits and refinancings, but it does not yet unlock ground-up private work — which is why permitted projects are still waiting to start.

Sources

• Board of Governors of the Federal Reserve System — Senior Loan Officer Opinion Survey on Bank Lending Practices, July 2026: https://www.federalreserve.gov/data/sloos/sloos-202607.htm
• Board of Governors of the Federal Reserve System — SLOOS July 2026, Table 2 (commercial real estate lending): https://www.federalreserve.gov/data/sloos/sloos-202607-table-2.htm
• Board of Governors of the Federal Reserve System — SLOOS July 2026, chart data: https://www.federalreserve.gov/data/sloos/sloos-202607-chart-data.htm