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A construction boom in the U.S. has resulted in lower rents and other benefits for renters.
Record-construction activity since the pandemic has increased the supply of empty units, meaning more inventory is available for renters. More multifamily units were completed in June than in any month in nearly 50 years, according to Zillow Group, an online marketplace for real estate.
Landlords are taking notice and are now adding rent concessions — discounts, incentives or perks to attract new renters — like free weeks of rent or free parking.
About one-third, 33.2%, of landlords offered at least one rent concession in July across the U.S., up from about one-quarter, 25.4%. last year, Zillow found.
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Meanwhile, the median asking rent prices for apartments in one- to three-bedroom units fell in July, the first time that’s occurred since 2020, according to Redfin, a real estate brokerage site.
The median asking rent price for a studio or one-bedroom apartment fell 0.1% to $1,498 a month; two-bedroom apartments decreased 0.3% to $1,730; and units with three bedrooms or more, were down 2.% to $2,010, per Redfin data.
Rents are still high because of how much prices climbed during the pandemic, said Chen Zhao, who leads the economics team at Redfin. But now, rent growth has flattened, which can be seen as “good news for renters,” she said.
Sun Belt states are leading the trend
Metro areas in Florida and Texas, two Sun Belt states that have introduced a high number of newly built apartments since the pandemic, are seeing significant rent price declines as more units become available, according to Redfin.
For example, the median asking rent price in Austin, Texas, fell to $1,458 in July, a 16.9% decline from a year prior, according to Redfin. It was the biggest drop among all other analyzed metro areas in the national report, the firm noted.
The median asking rent price in Jacksonville, Florida, declined 14.3% in the same time frame, to $1,465, per Redfin.
To compare at a state-wide level, the median rent price in Texas stands at $1,950, according to Zillow. That comparable price in Florida is $2,500, it found.
Rent concessions are up from a year ago in 45 of the 50 largest metro areas in the U.S., according to Zillow.
The annual increase in the share of rental listings offering concessions is the highest in Jacksonville, Florida, which saw concessions rise 17 percentage points, followed by Charlotte, North Carolina (15.7 points), Raleigh, North Carolina (14.7 points), Atlanta (14.5 points); and Austin, Texas (14.1 points), per Zillow data.
How wage growth helps rent costs
Historically, wage growth and rent growth have been very linked, said Orphe Divounguy, a senior economist with Zillow’s Economic Research team.
How tight the labor market is can be predictive of how tight the housing market is going to be, he explained.
The labor market has eased recently, with the number of candidates outpacing the jobs available. In July, nonfarm payroll 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 of 2021.
“When wages are rising rapidly, that helps to support housing demand,” said Divounguy. “As the labor market loosens, we expect the rental market to continue to loosen.”
Wages are growing 4% to 5% year over year, said Zhao: “That’s good. That means that rents are actually falling relative to wages. Your wages are increasing more than rents are.”
To be sure, wage growth has slowed. Wages and salaries increased 5.1% in June for the 12-month period ended in June 2024, according to the Bureau of Labor Statistics.
Wage growth peaked at 9.3% in January 2022, and has slid down to 3.1% by mid-June, returning to pre-pandemic wage levels, according to Indeed Hiring Lab Institute.