A Golden Era for Renters: Understanding the Recent Boom

Over the past two years, renters have quietly enjoyed a rare period of advantage in the housing market. A historic wave of apartment construction has helped ease the pressure on rents, which had skyrocketed during the pandemic. In 2024, developers completed the most apartment units nationwide since 1974, marking a significant turning point. This surge in supply has given renters more options and bargaining power, with landlords offering attractive concessions like free rent, parking, and gift cards to attract tenants. Experts have even dubbed 2025 as "the year of the resident," highlighting the favorable conditions for renters. However, this golden era may be coming to an end as construction activity begins to slow down, signaling a potential shift in the balance of power.

The Boom’s Impact: More Supply, Better Deals for Renters

The recent construction boom has had a profound impact on the rental market. With so many new apartments hitting the market, landlords have been forced to compete aggressively for tenants. This has resulted in significant discounts and incentives, a stark contrast to the double-digit rent hikes seen in 2022. According to data from Yardi Matrix, year-over-year rent growth has remained below 1% for the past 16 months. Additionally, nearly 13% of apartment units nationwide were offering concessions by the end of 2024, nearing the highs seen during the early months of the pandemic. This trend has benefited not just high-income renters but also those in more affordable buildings, as landlords strive to retain tenants in a competitive market.

The Construction Slowdown: What It Means for Renters

Despite the current favorable conditions, the outlook for renters is about to take a turn for the worse. The number of new apartment starts has dropped significantly, with 2024 seeing the fewest new units under construction in over a decade. This slowdown is largely due to rising construction costs and higher interest rates, which have made it more expensive for developers to secure loans. As a result, the supply of new apartments is expected to dwindle in the coming years. RealPage predicts a sharp decline in new deliveries, from 470,000 units in 2025 to just 265,000 by 2026. This reduction in supply is likely to lead to another apartment squeeze, paving the way for rent increases and fewer concessions for renters.

Regional Variations: How Different Cities Are Affected

The impact of the construction slowdown will not be felt equally across all regions. Cities in the southern and western United States, such as Austin, Atlanta, Phoenix, and Houston, have seen a significant influx of new apartments in recent years. These markets may experience slower rent growth as the new supply absorbs demand. However, the relief is likely to be short-lived, as these areas have also seen higher population growth and housing demand. On the other hand, coastal markets like New York, Boston, San Francisco, and Seattle are expected to face even greater challenges. These cities already struggle with limited land availability and stringent permitting requirements, making it harder to build new apartments. As a result, renters in these areas may face steeper rent increases and fewer options.

Expert Insights: The Cyclical Nature of Apartment Construction

Housing economists have long noted the cyclical nature of apartment construction, which tends to swing between periods of overbuilding and underbuilding. This cycle is not ideal for either renters or investors, as it creates periods of feast and famine in the market. According to Jay Parsons, a housing economist, the current construction slowdown is part of this inevitable cycle. Parsons argues that a national construction fund could help stabilize the market by providing cheaper debt for developers, reducing their reliance on fluctuating interest rates. Without such measures, renters may be forced to endure another round of rising rents and shrinking concessions.

Looking Ahead: The Future of the Rental Market

The next few years will be crucial for renters as the market transitions from a period of ample supply to one of potential scarcity. While leasing traffic has shown signs of picking up, with two straight months of year-over-year growth in late 2024, it remains to be seen how strong demand will be during the peak summer months. Experts predict that rent growth will remain modest in 2025, with increases ranging from 1.1% to 1.5%. However, this trend is expected to shift in 2026 and 2027, with rent growth potentially reaching the mid-single digits. For renters, this means that the current era of concession-laden deals may soon come to an end, leaving them to face higher rents and fewer incentives. As the market continues to evolve, renters would do well to take advantage of the current favorable conditions while they still can.