The tenants have discreetly appreciated a great race in the past two years. A historical wave of apartment construction rejected the rents of their peak from the time of the pandemic – the developers of last year have finished the most units on a national scale since 1974. With so many bright seeds Who strike the market, the owners are fighting to fill their spaces, offering major discounts and advantages to attract tenants. A housing economist even declared 2025 “the year of the resident”.
But as the cost of construction has increased, the number of cranes on the horizon has decreased. The formerly impatient developers reduce fresh construction plans, laying the basics for another apartment compression. In other words, good times for tenants are exhausted.
Time is not yet in place. The developers are expected to deliver another half-million apartments this year, slightly down compared to 2024, which should force real estate managers to focus on maintaining their buildings instead of raising the rents. The prospects of the tenants, however, become darker once you look at 2026 and beyond. The supply of apartments has exploded in recent years, but demand has followed the pace – there is no overabundance of empty units. And the construction pipeline has decreased considerably since the glory days of cheap money, while it was easier for developers to guarantee loans for new projects. While many rentals opened their doors in 2024, the apartment manufacturers inaugurated the least units in more than a decade.
“The available inventory of rental housing can quickly tighten,” explains a recent Realpage report, a software company that helps owners establish their rents. The real estate analysis company, Yardi Matrix, characterized 2025 as a “year responsible for change”.
Translation: Hang these apartments as you can. They will probably not last much longer.
The past few years have been chaotic for the inhabitants of the apartments. The demand for apartments climbed in 2021 while the tenants headed for larger places, left their parents’ houses or said goodbye to roommates in favor of solo life. This increase in “household training” pushed rents even though people have decamped overcrowded cities to unified houses in the suburbs. Zillow noted that apartment rents increased by more than 20% at the national level from 2020 to 2022. At the same time, however, developers were preparing the ground for a reversal. At a time of 2022, more than a million new apartments were under construction across the country. The new constructions rush has materialized in the past two years: according to Realpage, the developers have opened a total of 440,000 units in 2023 and a record of 588,900 last year, with 500,000 others should be available in 2025.
All these new buildings have checked prices; As the rental economist Jay Parsons says, they “did what the offer is supposed to do”. With many new units on the market, tenants have more choices and are less likely to tolerate high rent hikes. Yardi Matrix data indicate that the growth of rents from one year to the next has remained less than 1% in the last 16 months, well below the two -digit jumps of 2022. Free rent, free parking and gift cards used to attract to attract and keep tenants – are back in fashion. At the end of 2024, almost 13% of the country’s units offered concessions, closely close to the summits of all time in the first months of the pandemic, while almost no one wanted to move.
The construction of apartments tends to be too cyclical, and I do not think that it is a good thing for tenants or investors.
All kinds of tenants – not only the high wages which can afford the most recent and the largest in the construction of apartments – have benefited from this development boom. The owners generally deploy concessions when they try to rent new buildings, most of which are classified as “luxury” these days. But even longtime buildings with cheaper apartments have offered gifts to prevent tenants from fleeing for greener pastures.
“It’s just a simple supply and demand game,” said Carl Whitaker, the Realpage chief economist. “As more supply provides, you must draw more traffic towards your property, and this comes with these incentives.”
The problem for tenants is that real estate directors could soon find these unnecessary efforts. The developers count strongly on the debt to finance new projects, and the interest rate increases of the Federal reserve made these loans much more expensive, which caused a slowdown in construction plans. The manufacturers have been dissuaded by the wave of new supplies on the market and the prospect of lower rent growth in their properties. In doing so, they laid the foundations for another shortage of apartments – and for rents to start climbing.
“The pendulum swings considerably,” said Parsons. “Unfortunately, the construction of apartments tends to be too cyclical, and I do not think it is a good thing for tenants or investors.”
Prying the twists and turns of the economy can be difficult, but forecasting the supply of the new appearance is quite simple. If you know how many units are under construction today, you can reasonably estimate the new offer in a few years. These figures indicate a seismic change in the rental landscape. The departures of construction of apartments dropped last year at the lowest level since 2013, by Realpage. This slowdown will soon begin to appear in the number of new apartments to come on the market. Yardi Matrix provides 524,000 deliveries in 2025, but only 414,000 in 2026 and 341,000 the following year. Realpage anticipates an even more serious drop, from 470,000 new units this year to 265,000 in 2026, with another drop in the following year. Christopher Bruen, economist at the National Multifamily Housing Council, wrote last year that this retirement was “likely to exacerbate the housing shortage of our country in the longer term”.
American cities will not feel the effects of this decline. Most of the apartments built during this construction construction are in the lower half of the country – Austin, Atlanta, Phoenix and Houston, among others. Some metros in the mountain region, such as Denver and Salt Lake City, have also welcomed many new apartments. The rents on these markets may be slower to increase, but the demand for housing in these regions has also been higher than in other places in the country, so that relative relief may be short -lived. As for the main coastal markets like New York, Boston, Seattle and San Francisco, where land availability and obstacles already allow the construction of apartments, this could be even more difficult for tenants. In a recent call for results with Investors, an executive from Equity Residential, one of the largest owners of apartments in the country, described the reduction of supply as “even more dramatic” in these markets, where departures have been lowered by 30 % in 2023 and almost 60 years % in 2024.
“With the departures in 2025 projected to be broken again, we plan that one of the best sales of the offer of our coastal markets that we have seen for a very long time,” said Alexander Brackenridge, Director of Investments for the Company.
A complicating factor is the construction delays. Doug Sentler, Yardi Matrix Business Intelligence Director, says that the completions planned for 2025 can bleed in 2026 and even 2027 due to supply chain problems or labor shortages, lightening pain for tenants. The company expects rents to increase a modest of 1.5% this year, 1.1% in 2026, then by 3.3% in 2027. Parsons anticipates an even greater growth of a Year 2026. This kind of increase is far from hikes of rent in the pandemic era, but that would always mean the end of this dealership era for tenants.
It took a perfect storm of factors to generate this boom from massive construction. And now many of these factors have just disappeared.
If the demand for apartments really resumes – if, say, people feel better in their economic perspectives or decide that the rental will be lacking more for their money than the purchase – the growth of rents could climb even more. Whitaker tells me that it is still too early in the year to say how many tenants will seek new units during the peak summer months, but there are already signs that this year could be warmer than the last. In November and December, rental traffic – The number of potential tenants checking the new apartments – increased compared to a year earlier. It may seem ho-hum, but it was the first time since the beginning of 2022 that rental traffic has won two consecutive months of growth from year to year.
“My interpretation is that we will see a lot of request this summer,” said Whitaker.
Are we condemned to repeat these cycles, while waiting for any piece of relief from the accommodation to be revealed as a mirage? Let’s not think so. He underlines a national construction fund – which could provide cheaper debts to developers so that they are less likely to retreat when interest rates increase – as a bipartite solution that could smooth these roller coaster mountains. In the absence, however, the tenants are still looking at another mute ride.
“It took a perfect storm of factors to drive this boom from massive construction,” said Parsons. “And now many of these factors have just disappeared.”
James Rodriguez is a main journalist for the Business Insider speech team.
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