- Rents are dropping in Southern and Sun Belt cities after a surge in new apartment construction.
- Meanwhile rents are still going up in Midwestern and Northeastern cities.
- Rents are still quite elevated over pre-pandemic levels in most places, hurting affordability.
Communities across the country have struggled with soaring rents over the last few years. But recently, that story has begun to change.
While rents are continuing to rise, particularly in the Northeast and Midwest, they're falling in markets across the South and Sun Belt. One likely reason? A ton of new apartments.
The US is on track to build a record number of new multifamily units this year — about 500,000, thanks in large part to Southern and Sunbelt metros like Dallas, Phoenix, Raleigh, Charlotte, Nashville, and Austin. Two-thirds of the 1.8 million apartments built over the last five years were located in the Sun Belt, the real estate analytics firm CoStar recently reported.
The building boom was made possible in part by less restrictive land-use laws and other regulations governing construction, experts say.
The new supply of apartments is expected to keep rents relatively flat in the Southeast and Southwest next year, even as the rate of new multifamily construction is expected to slow significantly, said Jay Lybik, director of multifamily analytics at CoStar.
Rents fell in 15 of 21 Southern markets — falling across the region by 1.4% — over the last year, Harvard's Joint Center for Housing Studies reported this fall. Meanwhile, rents in Midwestern markets have increased by 2.7% and by 2.4% in the Northeast.
But renters in booming Sun Belt and Southern cities still face affordability issues. Rents remain far higher in most places than they were pre-pandemic. Nationwide, the average rent of main residences in cities was up about 27% between October 2019 and October 2024; in the South comparable rents grew 33% over that period.
One factor impacting affordability is that because the cost of land, building materials, and labor are elevated, developers are mostly building luxury apartments rather than mid-priced or affordable units, Lybik said.
"They're building at the top end of the price point, and so you're not getting the full impact of housing at different price levels throughout the entire market," Lybik said. Markets that are seeing more affordable apartments being built "tend to be very, very far out geographically from an urban core."
Multifamily rental housing also disproportionately caters to small households of one or two people. Markets with an abundance of studio and one-bedroom apartments may still suffer from a shortage of other types of housing, like larger for-sale homes suitable for families, Lybik said.
At the same time, rent is expected to continue climbing in the Northeast and Midwest, Lybik said. Cities from Cleveland to Boston aren't building enough new multifamily housing to keep up with a resurgence in demand in walkable, high-density neighborhoods in urban cores. Over the last year, average rent rose the most among submarkets tracked by CoStar in South Cleveland and the East Village in Manhattan.
"Cleveland has not seen very much new construction coming online, and Cleveland has been very aggressive in trying to really make their downtown and the areas adjacent to their downtown very highly amenitized, very livable, and they've definitely become very popular," Lybik said.