Read more Status coverage how communities across the country are trying to create more affordable housing.
The historic pace of apartment building construction is starting to have an impact on rents in the Sun Belt, but most renters are still paying significantly more than they were earlier this decade, and rents continue to rise in many Northeastern and Midwestern states.
The fact that rents are starting to fall as more housing comes online, yet remain dangerously high for most low- and moderate-income renters, adds fresh fuel to the debate about how to assist more people afford rising housing costs .
More and more often states are seeing fresh apartments and other housing construction as the answer, although experts disagree on how much more is needed – and where – as supply begins to outstrip demand in some areas. New construction is also high-priced, given today’s inflated costs of materials and labor, and does not usually create a vast number of housing units that lower-income people can afford, although it can prevent the gentrification of existing affordable areas.
“When you don’t allow enough homes to be built in high-income neighborhoods, higher-income people tend to move to lower-income areas,” said Alex Horowitz, who directs the Housing Policy Initiative at the nonprofit Pew Charitable Trusts. “Then lower-income people will have nowhere to go.”
Nationally, December rents decreased slightly in 2024 for the second year in a row, according to an Analysis of the Apartment List leasing transactions. December rent peaked at a median of $1,394 in 2022 and is now down slightly, down about 2%, to $1,373 last year.
The biggest two-year declines occurred in Sun Belt states that experienced housing booms: Rents in Arizona, Georgia and Utah fell 6%, and in Texas and North Carolina they fell 5%, according to a Stateline analysis of Apartment List data. a company that publishes rental advertisements on the Internet. Alabama, Colorado, Florida and South Dakota all saw declines of about 4%.
New housing, mostly in Sun Belt states, has led to a decline in national average rents, but rents in 32 states and the District of Columbia are trending upward as of 2022. These states include North Dakota (up 14%), Alaska (up 13%), Connecticut and Wyoming (up 9%), and Kansas (up 8%). Vermont and West Virginia were not included in the analysis because the Housing List did not provide sufficient information about leases in those states, although both states have vast percentages of tenants paying rent that is in excess of their income.
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Housing boom in Austin
Austin, Texas, which has had the highest rate of fresh construction in recent years, seems to be a perfect example of the effect of more investment: recent social media posts show newborn renters celebrating lower rents.
In January TikTok video titled “Jaw Off the Floor,” Becca Flores, 27, said: “I just got an offer to renew the lease on my apartment in Austin, Texas, and the price dropped by almost $200. “Something like this has never happened to me,” she said in the video. Many of the hundreds of comments included similar stories about unexpected rent reductions.
Renters in the Northeast and Midwest weren’t so lucky.
In New Jersey, which saw an influx of fresh residents that began with people fleeing New York City during pandemic lockdowns, average rent rose 3% from 2022 to $1,885. State efforts to force more urban housing have backfired with local opposition.
Palisades Park, a Korean-American neighborhood of about 21,000 people in New Jersey a few miles from Manhattan, has been overwhelmed by developers’ proposals to build more housing, said Democratic Mayor Chong “Paul” Kim. The borough has settled recent lawsuits from developers by partially agreeing to allow accessory dwelling units, called ADUs, which could assist some cost-stressed homeowners by allowing them to earn rent from ADUs on their property.
“We wanted to do something that would benefit the current residents,” Kim said. “Residents say that reducing emissions is a good move [apartment] development. The judge said we can’t slide, we have to follow state law. We’re trying to prevent a concentrated influx of investment at once – we don’t have the public services to support it.”
Another New Jersey mayor, Republican Mike Ghassali of Montvale, calls the state law “forced urbanization.” Ghassali led 26 communes court challenge last fall.
Rents increased dramatically in 2021 and 2022, and in no state have they returned to pre-trial levels: Rents have increased from 12% in Minnesota to 42% in Wyoming since December 2020, when they fell at the beginning of the pandemic.
But several rapidly building metros have seen drastic declines: Average rent in the Austin area has fallen 13%, or $199, to $1,362 from 2022. In Atlanta; Jacksonville, Florida; Phoenix; and Raleigh, North Carolina, average rent dropped 7%.
Austin was listed on a separate Apartment List analysis in Junewhich shows that rents have started to fall due to the highest pace of apartment construction in the country. Construction permits for approximately 10 apartments per 1,000 residents were issued in the Austin metro area between 2021 and 2023.
By comparison, in Northeastern and Midwestern metropolises that saw little construction at the time, rents rose, not fell. Cleveland, Milwaukee, and Providence, Rhode Island, had some of the largest increases and the lowest construction rates: less than one unit per 1,000 residents was permitted.
Vermont and West Virginia are not included in the housing list, but in both states, nearly half of renters pay more than 30% or more of their pre-tax income for rent and utilities, an amount considered excessive by federal standards.
How large is the difference?
Housing construction reached a historic high last year, with 67,000 housing units completed in August, the highest number on record in a single month since October 1974, and the total annual housing construction rate approaching 1.7 million annually.
Estimates of the national housing shortage vary widely, ranging from 1.5 million houses and apartments to 20.1 million. Most experts estimate the shortfall will be between 1.5 million and 5.5 million, according to Daniel McCue, a senior research fellow at the Joint Center for Housing Studies at Harvard University.
Freddie Mac, the federal agency that buys home loans to support the housing market, estimated the 2020 shortfall at $3.8 million, and he said in November that the difference was 3.7 million as of Q3 2024, despite all the recent construction.
“While the United States added 5.8 million units compared to our previous estimate, we also added 6.3 million households,” Freddie Mac deputy chief economist Leonard Kiefer said in a statement, adding that another million families would rent or buy , if they could, but they were priced outside of today’s market.
However, not everyone thinks it is missing.
Kirk McClure, professor emeritus of land exploit planning at the School of Public Affairs and Administration at the University of Kansas, published last year’s article arguing that the nation built too many houses and apartments during the price bubble years of the behind schedule 2000s, and that between 2000 and 2020 the number of fresh families exceeded the number of fresh families by 3.3 million.
“We are still struggling to absorb that excess supply to this day,” McClure said. Prices would fall if we built millions of fresh homes, he added, “but we don’t want to go back to 2008,” when housing prices collapsed during the Great Recession.
Instead, McClure said, the answer is to put more money into the pockets of lower-income people.
“We need to increase people’s incomes,” McClure said. “I have often said that the best housing program available is the minimum wage. Once income reaches $20 an hour, affordability issues begin to disappear.
The problem, McClure said, is that people want to live in certain places and raise prices in those areas, not that there is a nationwide housing shortage.
“A friend of mine lives on the Upper West Side of Manhattan, which is just a wonderful part of New York, but I think we all agree it’s expensive and New York doesn’t want to build hundreds of thousands of apartments there,” McClure said. “The truth is that even in an area of New York that considers itself suffering from a housing shortage, there are apartments waiting for you in New Jersey if you want to commute to work.”
But Rob Warnock, senior research specialist at Apartment List, said suburban and suburban development will never make up for the lack of housing in popular cities.
“To improve affordability, we need to build housing in places where people want to live,” Warnock wrote in an email.
