Feb 24, 2024 - Business

Why the apartment boom won't bring down rent for many

Change in asking rent by apartment type, Q4 2022 to Q4 2023
Data: CoStar; Note: CoStar rates multi-family buildings on architectural design, structure, amenities, site and certifications; Chart: Alice Feng/Axios

Across the country, renters with the deepest pockets are more likely than others to score a deal.

Why it matters: A flood of new construction is pushing down U.S. rents at the high end, where there are often more apartments than renters who want them.

The big picture: Demand for more affordable apartments is helping to keep middle-of-the-road rent prices elevated.

  • Rent for middle-tier apartments nationally was up at the end of 2023, according to real estate firm CoStar Group, which rates buildings based on design, amenities, location and certifications.
  • U.S. rents generally are still above pre-pandemic levels, analysts say.

State of play: While the country needs more housing, most new apartments are loaded with amenities in prime locations.

  • Around 89% of the units completed from 2020 through 2022 are high-end, per RentCafe.
  • The high-rises that some areas built in recent years include perks like rooftop bars, pet decks and towel service.

What's next: It could be a few years before there's enough demand to soak up the excess supply that's overwhelming some markets like Austin, Texas and Phoenix, says Jay Lybik, CoStar's national director of multifamily analytics.

  • "We've got to get these buildings finished, and start filling them, without having more come online," Lybik tells Axios.

Be smart: Prices you see in the headlines are asking rents, meaning new leases only.

The intrigue: It's not just rent deals. Another way to help fill fresh apartments is to hire an influencer.

  • Dallas-based content creator Kenzie Elizabeth recently promoted a high-rise there, and some off-campus apartments use student ambassadors.

What we're watching: The pipeline for new projects is already slowing as developers find it harder to get financing.

Go deeper: Housing was wildly unaffordable for half of renters in 2022, report shows

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