Rent Trends

Dive Brief:

• For the first time in seven months, the national average rent rose slightly, up $1 to $1,713 in February, according to Yardi Matrix’s latest Multifamily National Report. Year-over-year rent growth remained unchanged at 0.6%.
• Northeast and Midwest rent performance remained strong, with New York City leading the major metros at 5.4% YOY rent growth and 0.6% growth for the month of February. However, rents in Sun Belt markets are beginning to fall back after years of strong performance, given a surge of new supply.
• The national average rent has now fallen back to the same level it was 18 months ago. This reflects a number of shifting trends in the market, including an unusually high number of deliveries, which are expected to fall off in the coming years, according to Yardi.

Dive Insight:

While demand for new apartments has remained steady, the pace of new apartment deliveries — another 1 million units are expected to come online by the end of 2025 — has put a damper on occupancy overall. The national occupancy rate fell 60 basis points YOY to 94.5% in January, after peaking at 96.2% in late 2021, and Yardi expects this number to fall further. 

High rent growth in New York and New Jersey is fueled by a strong economy, high wages and a surge of immigration over the past two years, according to Yardi. While this area has some of the highest rents in the country, peaking at $4,829 in Manhattan, it also has a relatively low rent-to-income ratio. Meanwhile, despite falling occupancy, Columbus, Ohio; Kansas City, Missouri; and Indianapolis are seeing moderate rent growth that still falls below the national average.

After several years at the top of the rent growth charts, the most active Sun Belt and Southwest markets — including Charlotte, North Carolina; Tampa, Florida; Austin, Texas; and Phoenix — are seeing low or negative rent growth. Austin’s rent growth peaked at 24.0% in February 2022, but has now fallen into the negatives at -6.2%, the lowest of the major metros, according to the report.

Nashville, Tennessee; Orlando, Florida; Raleigh, North Carolina; Charlotte; and Austin have all added more than 4.0% to their total apartment stock in the last 12 months and have also experienced negative rent growth during the same period. Many of these markets have much more inventory yet to come — Austin’s pipeline stands at 64,000 units, while Charlotte has 37,000.

Despite this negative growth, demand for apartments in these markets is still strong, as is absorption. 

“Economic and population growth is the lifeblood of multifamily,” reads the Yardi report. “While high-demand markets are likely to record weak rent growth over the next year or two, the seeds of a rebound have been planted, as starts are declining and deliveries will drop in 2026 and 2027.”

Dive Brief:

• While Miami is once again the most competitive rental market in the country, other markets in the Sun Belt and Midwest aren’t far behind, according to RentCafe’s annual analysis.
• As a whole, RentCafe rates the country’s Rental Competitiveness Index at 73.4 out of a possible 100. Miami, which comes in at 91.9, has 14 prospective renters for each of its vacant apartments, driven by a thriving economy, strong job opportunities and desirable location, according to the study. 
• While high demand fuels some of this competition, the most competitive rental markets are also notable for their anemic new supply levels. The top 20 markets have an average share of units built within the last year of 0.49% of total stock, below the national average of 0.67%. 

Dive Insight:

RentCafe bases its RCI on five data points — new apartment construction in the past year, number of prospective renters, lease renewal rates, occupancy and days until a vacant apartment is leased.

Miami has grown more competitive since the last report at the start of 2023. While occupancy there is down slightly, units spend less time on the market and potential renters per unit have fallen, Miami’s lease renewal rate is up to 73.4% in 2024 from 70.9% in 2023, and its share of new units has fallen from 1.24% to 0.97%.

The Midwest takes seven out of the top 20 spots after Miami, starting with Milwaukee at No. 2 with an RCI of 87.0. Milwaukee has nine renters for each vacant unit and sports a strong job market, affordable cost of living and a number of urban renewal initiatives. 

Out of the top 20 markets, the vast majority — 17 — have a lower share of new apartments than the national average. Four of these markets — Oklahoma City (No. 6); Bridgeport-New Haven, Connecticut (No. 7); Lansing-Ann Arbor, Michigan (No. 9); and Silicon Valley, California (No. 20) — have not had any new units open at all.

For Silicon Valley in particular, RealPage notes that hybrid work and return-to-office policies have led to higher demand for a limited supply of units, as workers have moved back into the urban core to be closer to their offices. This region has the lowest days-on-market average in the state at 37 days.

David D. Cross is partner and chair of San Francisco-based Morrison Foerster’s antitrust litigation practice and is a first-chair trial lawyer representing domestic and multinational companies in complex matters.

Opinions are the author’s own.

Antitrust scrutiny of the rental housing industry has reached new heights in the form of nationwide class actions, federal and state investigations and congressional inquiries. A key focus is the longstanding use of algorithmic revenue management software, which critics argue allows housing providers to increase prices above competitive levels. 

President Joe Biden, in his State of the Union address, talked about using federal antitrust laws to lower rental housing prices.talked about using the

In addition to the high-profile multifamily cases focused on RealPage and Yardi, private plaintiffs have targeted additional third-party software and data providers, mobile home providers and large hotels with conspiracy claims regarding rental prices. In addition, members of Congress are urging regulators to investigate potential antitrust violations in the multifamily housing industry. 

The Department of Justice has ongoing antitrust investigations into RealPage’s revenue management software and its use. Late last year, DOJ expressed support for the private plaintiffs’ claims pending in federal court in Nashville, but the court notably rejected DOJ’s position that the plaintiffs alleged a per se offense. 

DOJ, along with the U.S. Federal Trade Commission, recently filed a similar statement of interest in support of plaintiffs’ claims against Yardi and various housing providers in Washington. 

On March 20, Politico reported that DOJ has expanded its ongoing civil investigation into the rental housing market by opening a criminal investigation into RealPage and certain users of its revenue management software. The article confirmed rumors about a criminal probe in the industry — one of the only known criminal investigations involving algorithmic pricing tools. 

State attorneys general are pursuing their own investigations into these concerns, and two already have filed suit. On November 1, 2023, the District of Columbia sued RealPage and 14 property managers. Arizona filed a similar lawsuit against RealPage and 10 property managers on February 28, 2024.

Mitigate risk

With lawsuits and investigations mounting, housing providers and others in the industry need to be aware of increasing antitrust risks associated with information sharing and algorithmic software. 

Although it is of course not an antitrust violation for firms to use such software to help with their own independent decisions, including setting their own prices and managing their own inventory, unfortunately even meritless lawsuits and investigations can impose enormous expense, exposure and business disruptions for both providers and users of such software. 

Exchanges of certain types of commercially sensitive information can increase this risk even when entirely lawful due to growing actions by private plaintiffs and antitrust enforcers. Property managers and owners would be particularly well served to implement a robust antitrust policy and compliance program that addresses these and other emerging technologies.

They can also mitigate antitrust risk by taking certain steps. Although these steps should not be needed to insulate lawful, independent action against antitrust exposure, they nonetheless are highly valuable in the current climate. They are: 

Use software as a recommendation. It is prudent to treat revenue management software as one input among others when setting prices and managing inventory. Recommendations generated by the software are best treated as exactly that: recommendations, or suggestions, that each user independently decides to accept or reject for any given rate.

Document each decision. Revenue management users are well served documenting in real time their independent decision-making, both when licensing the software and when subsequently using it to help set prices and manage inventory. 

Importantly, revenue maximization is not the same as price maximization. Maximizing revenue often involves reducing prices to sell more volume, which revenue management software frequently recommends. Maintaining a record highlighting independent action and decision-making — including the reasons for the decisions — can help show government enforcers and courts that any concerns about collusion with competitors are meritless.

Know what you’re working with. Revenue management users should try to understand how the software works and what data sources it relies on for its recommendations. Software that is not fully understood by the users and operates like a “black box” can increase antitrust risk if only because the users themselves may struggle to show enforcers and courts that the software fully complies with the antitrust laws when in fact it does.

Identify the source of information. Revenue management programs that do not rely on non-public, commercially sensitive data from competing users for price or inventory recommendations present less antitrust risk than software that does in the current climate. 

To be clear, this is not necessary to comply with the antitrust laws. But it can help avoid getting drawn into costly, burdensome investigations and litigation designed to expand the scope of the antitrust laws. 

Provide training. Adopting a written antitrust compliance policy with accompanying employee training can help significantly reduce antitrust risk. The policy should be written in simple terms that employees at all levels can readily understand. 

Employees including senior leadership should be trained to identify potentially anticompetitive conduct and encouraged to promptly flag any such concerns for company counsel. Firms without in-house counsel would be well served to engage competent antitrust counsel to help prepare an appropriate policy, administer training and handle any reports of potential anticompetitive conduct within the protections of the attorney-client privilege.

 Hopefully, the courts will bring the issues surfaced by private plaintiffs and government enforcers to a swift conclusion. In the meantime, businesses should take reasonable measures to mitigate risk, including consulting experienced antitrust counsel.

Morrison Foerster attorneys Mary G. Kaiser and Benjamin E. Campbell contributed to this article.

Dive Brief:

• The national average multifamily rent remained unchanged in January at $1,710, following five months of negative growth, according to Yardi Matrix’s latest Multifamily National Report. Year-over-year rent growth rose slightly, up 10 basis points to 0.5%, but remains close to record lows.
• Rent growth is expected to remain weak through the rest of 2024 due to high deliveries. Roughly 500,000 new units came online in 2023, and another 540,000 are expected in 2024. However, new supply is expected to wane after that, owing to the drop in starts brought on by high-interest rates. 
• At the national level, demand remains strong after hitting record highs in 2021, driven by job growth, wage increases and rising immigration to places like New York and Chicago. According to a recent Congressional Budget Office report cited by Yardi, immigration totaled 3.3 million in 2023, a significant rebound from previous years.

Dive Insight:

Neither rent growth nor new deliveries are spread evenly across the country, according to Yardi. High-growth, high-demand secondary and tertiary markets in the West and the Sun Belt are seeing the most new supply, including Huntsville, Alabama; Colorado Springs, Colorado; Boise, Idaho; Austin, Texas; Miami; Denver; Phoenix and Nashville, Tennessee. Austin has the sharpest YOY rent decline out of Yardi’s top 30 at -6.0%, while Orlando, Florida, and Phoenix have both fallen more than 3.0%.

The Northeast and Midwest are seeing weaker demand, more stable occupancy, a slower pipeline of new supply and rising rents. New York City leads the nation in rent growth at 5.5%, followed by neighboring New Jersey at 4.4%.

Two sectors where new starts remain strong despite headwinds are affordable housing and build-to-rent properties. 

“Although both affordable housing and [single-family rental] starts fell somewhat in 2023 coming off record 2022 numbers, construction in both segments is well above previous years,” the report reads. “Affordable housing starts totaled 67,000 in 2023… more than three times the totals in 2013 and 2014. Similarly, starts of SFR communities with 50-plus units reached 32,600 in 2022, a tenfold increase from 2013 and 2014.”

Dive Brief:

• The Federal Trade Commission has announced a new proposed rule to prohibit businesses from charging “junk fees,” which it defines as hidden or bogus fees that are not disclosed to consumers before they begin a purchase.
• The rule would require businesses, including multifamily providers, to disclose all fees in a transaction when quoting or advertising a price. This, according to the commission, would ensure customers know exactly how much they are paying, what they are paying for and whether they can get a lower price elsewhere.
• The FTC would be able to seek monetary penalties against businesses that do not comply with the rule and secure refunds for customers.

Dive Insight:

In response to the announcement, National Apartment Association CEO Bob Pinnegar said that the organization supports transparency and dialogue between multifamily providers and residents, but is not in favor of added regulations, which he said can limit the availability of affordable housing.

“Rental housing fees are disclosed in the lease and during the application and leasing process. It is incumbent on both parties to ensure they can uphold the terms of their contractual agreement,” Pinnegar said in a statement provided to Multifamily Dive.

Once a notice for comment on the new rule is published in the Federal Register, consumers will be able to submit feedback in writing or electronically for 60 days. 

California recently banned junk fees at the state level with legislation set to take effect on July 1, 2024. The effort to ban junk fees nationwide is one of a number of recent Biden administration actions that could impact the multifamily housing sector; others include gathering information on certain housing practices, such as tenant screening processes and rent increases, and the creation of a blueprint for a Renters’ Bill of Rights.

Earlier this year, Marcia L. Fudge, secretary of HUD, released an open letter urging housing providers and local governments to “adopt policies that promote fairness and transparency of fees faced by renters.” Her recommendations included:

• Eliminating or limiting application fees.
• Allowing a single fee to cover multiple applications on the same platform, or to cover applications at multiple properties owned or managed by the same provider.
• Eliminating duplicative, excessive and undisclosed fees, including administrative or processing fees.
• Identifying bottom-line costs for tenants in advertising, including move-in costs, monthly rent and fees.

At the time, Nicole Upano, assistant vice president of housing policy and regulatory affairs at NAA, defended the presence of fees during the renting process. "Rental application fees are a necessary part of doing business, helping cover the costs associated with responsible screening,” Upano said. “It is paramount that housing providers retain the ability to screen prospective residents and ensure the long-term viability of rental communities.”

Proptech firm MRI Software recently released a report with a finding that is probably no surprise for apartment operators.

In analyzing over 1 million market-rate units from January through the end of August, the Solon, Ohio-based company found that the market is “reverting to pre-pandemic patterns and becoming more predictable.” After a couple of years of turbulence, 2023 is shaping up to be a lot like 2019, when leasing was strong in the spring and summer but slowed in cooler months. 

Cindy Clare, chief operating officer for Greensboro, North Carolina-based owner and manager Bell Partners, is seeing similar patterns in her portfolio. “We’re back to a more normal cycle than what we've been in in the last few years,” she told Multifamily Dive. “So, seasonality is playing a role.”

But a return this year to slower leasing in the fall and winter isn’t the only thing challenging apartment operators as the year comes to an end. A jump in supply is also becoming an issue in many metros around the country, with apartment completions in Q3 hitting the highest level since the 1980s, according to RealPage. 

In cities that are expecting a lot of new deliveries, like Austin, managers will be facing even more pressure. “In some places, you are going to be fighting for every single new tenant you can get, especially at the top end of the market,” said CoStar's National Director of Multifamily Analytics Jay Lybik.

To maintain occupancy in the face of these pressures, managers are turning to expiration management and, if needed, concessions.

Pressures on demand

Before COVID-19 upended regular patterns in 2020, spring and summer were the busiest times for apartment operators. More prospects sought new apartments during this time frame, touring properties and signing leases. Then, around late September or early October, traffic usually began to slow. 

Though it may have picked up briefly later in November until Christmas, operators were primarily focused on maintaining occupancy and renewals when fall arrived. 

This year, operators are dealing with the added pressure of more competition from new units just as demand cools.

“There is a lot of new construction finally catching up to or exceeding demand,” said Diane Batayeh, CEO of Southfield, Michigan-based apartment manager Village Green.

New apartment openings don’t pause just because the weather gets cold and fewer people are shopping for apartments.

“Things are coming online in the fourth quarter,” said Allyson McKay, managing director and executive vice president of management services at San Antonio-based developer and manager Embrey Partners. “We all hope and pray that things come online during the summer when people are looking. But when they come online during that fourth quarter, it makes it even more difficult.”

While rents have slowed, they haven’t gone negative yet, except in certain areas. “The only market we've seen go negative is Minneapolis, where there was such an oversaturation of new products,” Batayeh said.

Closing the back door

As seasonality returns to the market and supply picks up, occupancy will be a bigger focus this winter. “While we still look for some rent growth and we certainly do renewal increases and all of those things, we also push our occupancies,” Clare said.

Lease expiration management, where companies like Embrey look to reduce the amount of leases expiring at the same time, is an important tool to maintain occupancies, according to McKay. “We’re just ensuring that we've got that back door closed,” she said.

Village Green works to keep residents in place by getting three to five months ahead on renewals. 

“We're offering either no increases on lease trade-out rates or minimal increases on lease trade-outs,” Batayeh said. “So we’re really trying to stem the tide.”

Lowering rent is also an option, but it’s one that operators would like to avoid. “You don't want to dump your rents because you have those residents that are living there,” McKay said. “So it's just finding that right path to keep you on track through the slow season.”

As it negotiates with residents, Village Green is also trying to push more of its lease expirations to the warmer months, when it can more easily fill units and get rent increases. “In the past, we might not have offered that much flexibility on renewal,” Batayeh said. 

Concessions creep back in

In the third quarter, national apartment completions for the year reached 405,000 units, according to RealPage. But that is only the start. Another 656,000 units are scheduled to be delivered next year. As this supply hits, managers will offer incentives faster than they normally would to maintain occupancy. 

Generally, Bell wants to have its properties between 94% and 96% occupied. “If we’re starting to see traffic slowing down and occupancies are not quite where we want them to be, then we’re going to make adjustments to get the occupancy,” Clare said.

To combat vacancies, managers may have to pull a lever they like to avoid — offering free rent for a certain period of time or some other incentive to residents to sign a lease.

“We are starting to see, in some markets, concessions creep back in,” Clare said. “You may not be lowering your rents, but you’re now offering a small concession to get people to move in so that you can get your occupancies up where you want them.”

Village Green will also go to incentives in areas with high levels of new competition. “In those markets, it's up-front concessions where it doesn't really impact your rent roll because valuations are still very important,” Batayeh said.

Concessions may be here for awhile

While concessions may be back, the days of multi-month free rental offers common in 2008 and 2009 haven’t returned, according to some observers. “We are seeing one month for new lease ups to selective [smaller] concessions for existing assets that have run into problems,” said Jeff Adler, a vice president at Yardi Matrix.

Jay Parsons, senior vice president and chief economist at RealPage, has seen bigger concessions. 

“The concessions are really concentrated in lease ups and those can be two or three months in some cases, but we are not seeing nearly as many stabilized concessions in the cycle as we did in the Great Financial Crisis,” he said.

Eventually, the weather will warm up next spring and traffic should pick up again, but new deliveries won’t be going away, meaning concessions might be here to stay for a while.

“I expect that in 2024, we’ll probably see a little more of that as the supply delivers,” Clare said.

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