The recent housing boom is leading to stagnant rents, and more options for tenants mean landlords may need to make their offers more attractive.
Rents skyrocketed during the pandemic. But things have changed, and landlords and property managers are offering concessions to attract tenants — and to keep their apartments from sitting empty, according to Zillow. Perks can include weeks or months of rent-free rent, lower security deposits, discounted Wi-Fi or parking, and even help moving furniture into the new rental.
More multifamily homes were completed in June than in any other month in nearly 50 years. This “opens up new options for renters and spreads demand across more homes,” Zillow chief economist Skylar Olsen wrote in a monthly research report. Just over 33% of rental listings on Zillow nationwide included a discount last month; a year ago, about 25% of rental listings offered some type of discount.
Don’t be fooled, though, rents are still high, even if they’re rising at a slower rate. The typical rent rose less than half a percent in July, to $2,070. That’s a more than 3% increase from a year ago, but since the pandemic began, rents have risen over 33%. There are some differences between single-family and multifamily rents. Single-family rents rose nearly 5% year over year and 40% since the pandemic began. Multifamily rents rose nearly 3% year over year and more than 27% since the pandemic.
Still, the latest trend is a boon for renters, but not so much for landlords. And in some regions, it’s particularly acute. In six major metropolitan areas, more than half of rental listings on Zillow are discounted: Raleigh, Charlotte, Atlanta, Salt Lake City, Nashville and Austin. Austin was the only metro area where rents dropped month-over-month, while Raleigh struggles with one of the highest rental vacancy rates compared to other major cities.
In contrast, in more competitive metropolitan areas where there has been little decline, fewer listings mention concessions. There are fewer listings of rentals with offers in San Jose, Baltimore, Milwaukee and Pittsburgh. Like many other California cities, San Jose has a housing shortage, so lower rents, higher vacancy rates and slowing demand are not usually a problem for landlords there.
Still, the market overall is nowhere near as hot as it was during the pandemic. But “rather than reflecting slowing demand, it’s more likely that the massive influx of new homes into the market is causing demand to spread across more supply,” Olsen wrote. “That’s a hallmark of a healthier market with a better balance between supply and demand.”
As early as 2022, half of all renter households were considered cost-burdened, meaning they spent more than 30% of their income on housing. According to Harvard University’s Joint Center for Housing Studies, this equates to around 22 million American renters in total. Hopefully, this can be a step in a less costly direction for renters. But what lies ahead depends.
“The question going forward is whether the current status quo of slow rent growth and high concessions will continue or whether rents will actually decline,” Olsen said. “The recent decline in mortgage rates could dampen rental demand as more households can afford to buy a home. A slowdown in the labor market could also contribute to falling rents.”
