Rent Declines May Reverse as Permits Drop
Rents have declined for over a year, but low multifamily permitting may drive future increases in high-demand markets, Realtor.com said.
AUSTIN, Texas — Rents have been on a decline in the top 50 metros for over a year, but low multifamily permitting activity is making way for higher rent prices, according to the Realtor.com February rent report. In fact, within the top 50 metros only 294,000 multifamily units were permitted in 2024, which is well below the 318,000 units permitted at the peak of the pandemic in 2020.
"During the pandemic, rent prices surged significantly. While there has been a gradual correction, the current trend of declining rents over the past 19 months and a still-sizable number of multi-family units under construction have impacted builders' enthusiasm for new projects," said Danielle Hale, chief economist of Realtor.com. "The nation is short 3.8 million homes according to Realtor.com research. As builders attempt to right-size their construction pipelines amid shifting economic and policy cross currents, multifamily builders nationwide have made headway, evidenced by vacancy rates trending up. Still, the shortfall varies by market and region. The low level of permitting for multifamily housing, particularly in markets where rents are still climbing, may become a catalyst for future rent growth."
When supply is in a pinch, rent will rise
In hot markets where demand is high, and rent is already growing, low levels of multifamily housing permitting will cause further supply constraints and could make rents go up even higher in the future. For nine of the top 50 metros, multifamily permitting was lower than recent history in 2024, and these places experienced a rise in rent, including New York, N.Y., Kansas City, Mo., and Detroit, Mich.
On the other hand, nine of the top 50 metros saw more multifamily permitting in 2024 than over the previous five years and experienced rent price declines YoY (year over year) including Birmingham, Ala. where rent declined 5.4% YoY, and multifamily building permits grew by 22.10% from the average of the previous five years; Cincinnati, Ohio, where rent declined 3.3% while multifamily building permits grew 29.9%; and Cleveland, Ohio where rents declined 3.0% YoY, and multifamily building permits grew 37.9% from the average of the previous five years. In these metros, multifamily supply growth will put further downward pressure on rent.
Federal layoffs haven't affected rent prices yet
While data shows changes starting to happen in the for-sale markets of the major metros where federal employment is high, the rental shifts in these markets are relatively varied and show no meaningful changes yet. Within the five major metros with the highest concentration of federally-employed workers, rent is up 3.3% year-over-year in Washington D.C. with modest pick-up in Oklahoma City, Okla. (+2.0%) and Baltimore, Md. (+1.25%). In San Diego, Calif. however, rent experienced a sharp decline of 6% from a year ago, while also softening in Virginia Beach, Va. (-1.5%).
Larger rental units maintain demand as renters stay put
As fewer renters turn into first-time home buyers, demand for larger rental units remains high, with two-bedroom units seeing the most long-term rent growth over the last five years, at 18.3%. That's compared to one-bedroom units, which grew 14.3%, and studio units, which experienced the least rent growth, at 9.7%, in the same time frame.
While studio units tend to experience more volatility in activity, this month, rent growth for studio units dipped slightly at -0.8% YoY, more closely matching the year-over-year growth of one- and two-bedroom units, which both respectively experienced -0.7% dips in February 2025.
Methodology
Rental data as of January 2025 for studio, one-bedroom, or two-bedroom units advertised as for-rent on Realtor.com. Rental units include apartments as well as private rentals (condos, townhomes, single-family homes). We use rental sources that reliably report data each month within the 50 largest metropolitan areas. Realtor.com began publishing regular monthly rental trends reports in October 2020 with data history stretching back to March 2019. Construction permitting data comes from the Census Bureau Building Permits Survey.
Source: Realtor.com
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