The recent construction boom in the United States has had a significant impact on the rental market, leading to lower rents and other benefits for renters. With a record level of construction activity since the pandemic, the supply of empty units has increased, resulting in more inventory being available for renters across the country. According to Zillow Group, an online marketplace for real estate, more multifamily units were completed in June than in any month in nearly 50 years. This surplus of available units has driven landlords to offer rent concessions such as discounts, incentives, or perks to attract new renters.
The data from Zillow revealed that about one-third of landlords offered at least one rent concession in July, representing an increase from the previous year. This growth in rent concessions indicates a shift in the rental market towards more tenant-friendly terms. Landlords are now offering benefits like free weeks of rent or free parking to entice prospective renters. The median asking rent prices for apartments in one- to three-bedroom units have also seen a decline in July, marking the first time this has occurred since 2020, according to Redfin, a real estate brokerage site.
The rental market trends vary across different regions in the United States. Metro areas in states like Florida and Texas, which have witnessed a high number of newly built apartments since the pandemic, are experiencing significant rent price declines as more units become available. For instance, the median asking rent price in Austin, Texas, fell by 16.9% in July, showcasing the impact of the construction boom on rental affordability. Similarly, Jacksonville, Florida, saw a 14.3% decline in median asking rent price during the same period, highlighting the favorable conditions for renters in these areas.
Historically, wage growth and rent growth have been closely linked, indicating the importance of economic factors in shaping rental markets. Orphe Divounguy, a senior economist with Zillow’s Economic Research team, emphasized that the tightness of the labor market can be predictive of the housing market conditions. As the labor market has eased recently, with more job seekers than available positions, the rental market is expected to follow suit. Wage growth plays a crucial role in supporting housing demand, and as wages continue to rise relative to rental prices, renters may benefit from more favorable conditions.
While wage growth has slowed down compared to earlier in the year, it still outpaces rent increases in many areas. The data indicates that wage growth peaked at 9.3% in January 2022 but has since declined to 3.1% by mid-June, returning to pre-pandemic levels. The recent figures from the Bureau of Labor Statistics suggest that the labor market is adjusting to new dynamics, with fluctuating employment numbers and wage trends. The impact of these changes on the rental market remains to be seen, as renters navigate evolving economic conditions.
The construction boom in the U.S. has undoubtedly reshaped the rental market, leading to lower rents, increased supply, and more tenant-friendly terms. As landlords adapt to changing conditions by offering rent concessions, renters stand to benefit from improved affordability and a more competitive rental landscape. The relationship between wage growth, labor market conditions, and rental prices continues to evolve, shaping the overall outlook for renters in the coming months.