Economists polled by Reuters had expected groundbreaking to rise to a 917,000-unit rate last month.
Starts for multi-family homes tumbled 11.1 percent to a 263,000-unit rate. Groundbreaking for single-family homes, the largest segment of the market, increased 7.0 percent to a 628,000-unit pace, the highest since February.
The drop in multifamily starts could be the result of a spike in mortgage rates, which might be making developers cautious about taking on new projects.
Higher mortgage rates have slowed the pace of home sales, but demand for accommodation as household formation continues to recover from multi-decade lows is expected to keep residential construction supported.
Mortgage rates have risen in anticipation of the Federal Reserve reducing the $85 billion in bonds it is buying each month to keep interest rates low. Economists believe the Fed will make an announcement on the future of the program at the end of a two-day meeting later on Wednesday.
Permits to build homes fell 3.8 percent in August to a 918,000-unit pace. Economists had expected permits, which lead starts by at least a month, to be little changed at a 950,000 unit pace.
All the drag last month came from the multifamily sector, where permits dropped 15.7 percent. Permits for single-family homes rose 3 percent to their highest level since May 2008.