Rosalind Evans
The surge in U.S. construction is transforming the rental market, leading to lower rents and attractive perks for renters. With record construction activity driving new multifamily units, renters see more options and incentives. This trend has led to the most significant rental concessions in decades, making it a favorable time for renters.
Record Construction Surge Boosts Rental Inventory
Since the pandemic, the U.S. has experienced an unprecedented construction boom, resulting in a substantial increase in rental inventory. According to Zillow Group, June saw more multifamily units completed than in any month in nearly 50 years. This surge in construction has significantly increased the availability of rental units, providing renters with a greater selection of properties.
Landlords are responding to this increase in inventory by offering more rent concessions. “About one-third, 33.2%, of landlords offered at least one rent concession in July across the U.S., up from about one-quarter, 25.4% last year,” Zillow reported. These concessions include discounts such as free weeks of rent or free parking, which are becoming more common.
Declining Rents Across the U.S.
The influx of new rental units has contributed to a decrease in median asking rent prices. Redfin data indicates that in July, the median asking rent for a studio or one-bedroom apartment fell by 0.1% to $1,498, while two-bedroom apartments decreased by 0.3% to $1,730. Three-bedroom units saw a more significant drop of 2% to $2,010. This is the first decrease in median asking rents since 2020.
Chen Zhao, head of the economics team at Redfin, commented, “Rents are still high because of how much prices climbed during the pandemic. But now, rent growth has flattened, which can be seen as good news for renters.” This stabilization provides some relief for those struggling with high rental costs.
Sun Belt States Lead the Decline
Sun Belt states, particularly Florida and Texas, are witnessing the most significant declines in rent prices. In Austin, Texas, the median asking rent price fell to $1,458 in July, marking a 16.9% decrease from the previous year. Similarly, Jacksonville, Florida, saw a 14.3% drop to $1,465.
State-wide comparisons reveal that median rent prices in Texas average $1,950, while in Florida, they stand at $2,500, according to Zillow. The increase in rental concessions is notably high in cities like Jacksonville and Austin, reflecting the broader trend across the Sun Belt.
Wage Growth and Its Impact on Rent Costs
Wage growth is another crucial factor influencing rent prices. Orphe Divounguy, a senior economist with Zillow’s Economic Research team, explained, “When wages are rising rapidly, that helps to support housing demand.” However, wage growth has slowed as the labor market has eased and unemployment rates have increased. As of June 2024, wages grew by 5.1% over the past year, down from a peak of 9.3% in January 2022.
Chen Zhao added, “Wages are growing 4% to 5% yearly. That means that rents are falling relative to wages.” Despite slower wage growth, renters benefit from the current market dynamics, as rent increases are not outpacing wage growth.
The ongoing U.S. construction boom is reshaping the rental landscape, providing more affordable options and added incentives for renters. With increased inventory and rent concessions becoming more common, renters see tangible benefits. While rents remain high relative to pre-pandemic levels, the current trend towards lower rents and increased perks is a positive development for those in the rental market.
