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The construction boom in the United States has led to lower rents and other benefits for tenants.
Record construction activity since the pandemic has led to an increased supply of vacant units, meaning more inventory is available for renters. According to Zillow Group, an online real estate marketplace, more multifamily housing units were completed in June than in any month in nearly 50 years.
Landlords have taken notice and are now adding rent concessions — discounts, incentives or perks to attract new tenants — such as free weeks of rent or free parking.
Zillow found that about a third (33.2%) of landlords offered at least one rent waiver in July across the U.S., compared to about a quarter (25.4%) last year.
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Meanwhile, average asking rents for one- to three-bedroom apartments fell in July, the first time that has happened since 2020, according to Redfin, a real estate brokerage site.
The average asking rent for a studio or one-bedroom apartment fell 0.1 percent to $1,498 per month; two-bedroom apartments fell 0.3 percent to $1,730; and units with three or more bedrooms fell 2 percent to $2,010, according to Redfin data.
Rents are still high because prices have skyrocketed during the pandemic, said Chen Zhao, who leads Redfin’s economics team. But now, rent growth has stalled, which she said is “good news for renters.”
Sun Belt states are leading the trend.
Urban areas in Florida and Texas, two Sun Belt states that have delivered a large number of newly built apartments since the pandemic, are seeing significant declines in rental prices as more units become available, according to Redfin.
For example, the median asking rent in Austin, Texas, fell to $1,458 in July, down 16.9% from a year earlier, according to Redfin. That was the largest drop among all the metropolitan areas analyzed in the national report, the company noted.
The average asking rent in Jacksonville, Florida, fell 14.3% in the same time frame, to $1,465, according to Redfin.
For statewide comparison, the median rent in Texas is $1,950, according to Zillow. The comparable price in Florida is $2,500, it found.
According to Zillow, rent concessions are up compared to last year in 45 of the 50 largest metropolitan areas in the United States.
The year-over-year increase in the share of rental listings with concessions was highest in Jacksonville, Fla., which saw concessions rise 17 percentage points, followed by Charlotte, N.C. (15.7 points); Raleigh, N.C. (14.7 points); Atlanta (14.5 points); and Austin, Texas (14.1 points), according to Zillow data.
How Wage Growth Helps Lower Rent Costs
Wage growth and rent growth have historically been closely linked, said Orf DeVongoy, chief economist on Zillow's economic research team.
He explained that how tight the labor market is could be an indicator of how tight the housing market will be in the future.
The labor market has slowed recently, with the number of job seekers outpacing the number of available jobs. In July, nonfarm payrolls increased by just 114,000 for the month, down from 179,000 in June, according to the Bureau of Labor Statistics. The unemployment rate jumped to 4.3%, the highest level since October 2021.
“When wages rise rapidly, it helps support demand for housing,” DeVongi said. “As the labor market weakens, we expect the rental market to continue to weaken.”
Wages are growing 4% to 5% year-on-year, Zhao said: “That’s good. It means rents are actually falling relative to wages. Your wages are increasing more than rents.”
Wage growth has certainly slowed. Wages and salaries rose 5.1% in June for the 12 months ending in June 2024, according to the Bureau of Labor Statistics.
Wage growth peaked at 9.3% in January 2022, and fell to 3.1% by mid-June, returning to pre-pandemic wage levels, according to Indeed Hiring Lab.
