Rent growth is slowing, but that doesn't mean rents are affordable

The surge in rent prices over the past two years is keeping inflation high — and making life increasingly unaffordable for many Americans.

The big picture: While the rate of rent growth is slowing nationwide, and even falling in some regions, that's not helping most middle-class or low-income renters.

State of play: There's a shortage of affordable rental units in the U.S.

• Over the past two decades, most of the new units built were "Class A" — fancy places with luxe amenities in great locations.
• This year a record supply of newly constructed apartment buildings are coming onto the market — the most units delivered since the 1980s, said Jay Lybik, national director of multifamily analytics at data firm CoStar.
• But 70% to 80% of those new buildings are Class A.

The new supply is pushing down rent prices at the very high end in certain areas.

• "Imagine if the only new cars that were available for sale were Mercedes, Cadillacs and BMWs. That's what's happening in terms of rental housing," Lybik said.

By the numbers: Nationwide, asking rents on new leases are still climbing — in May they were up 1.5% from a year ago, according to CoStar. That's down from double-digit growth throughout 2022.

• In some regions where all that new inventory is hitting the market, rents have actually fallen, but mainly on new leases at high-end buildings.
• The largest drops: In Austin, rents are down 2.7% from last year. Las Vegas, -2.9%; Orlando, -0.3%; Phoenix, -2.8%.

Zoom out: These price cuts are on asking rents — which means new leases only. For those who haven't moved, it's likely they're paying monthly rates that are far higher than pre-pandemic levels.

• "Look, rents don't actually ever go down," said Flora Arabo, senior director of state and local policy at national housing nonprofit Enterprise Community Partners.
• Maybe you catch a break one year and your rent stays level, but that's it, she said.

The bottom line: With pandemic-era housing supports gone and prices up so far already, the U.S. is barreling into a rental crisis, Arabo said.

• "We may not be looking ahead to an eviction tsunami, but it's certainly going to be some kind of moment of reckoning on housing."