Apartment Construction Hits Record Highs, but Rental Competition Remains Fierce

A Surge in New Apartments, But Demand Outpaces Supply

Last year, the U.S. saw a record number of new apartment completions, with nearly 600,000 multifamily units finished, according to the U.S. Census. This marks the highest level since 1974 and a significant 34% increase compared to 2023. Cities like New York City, Dallas, and Austin led the way, adding thousands of new rental units to their markets. However, despite this influx of new supply, the rental market remains highly competitive, with demand continuing to outpace availability. A new report from RentCafe, a popular apartment search site, reveals that competition for rentals has actually intensified in many areas, leaving prospective renters scrambling to secure a place to live.

Why the Market Remains Competitive: Renters Are Staying Put

One key factor driving this competition is the rising number of renters choosing to renew their leases rather than move. According to RentCafe, lease renewal rates climbed to 63.1% in early 2024, up from 61.5% a year earlier. This trend is largely attributed to the challenges in the for-sale housing market, where higher mortgage rates and elevated home prices have made buying a home less accessible. As a result, many renters are opting to stay in their current apartments rather than take on the financial burdens of homeownership.

High Occupancy Rates and Longer Leases Add to the Pressure

The apartment occupancy rate remains strong, holding steady at 93.3%, slightly higher than at the beginning of last year. This high occupancy rate, combined with longer lease terms being offered by landlords, has reduced the number of available units on the market. In fact, the average apartment now attracts around seven applicants, making the competition fierce for renters. This dynamic is particularly pronounced in cities like Miami, where the occupancy rate is the highest in the nation, and an average of 14 applicants vie for each available unit.

Regional Hotspots: Miami Leads the Pack, Midwest Sees Rising Demand

Miami has emerged as one of the most competitive rental markets in the country, earning the nickname "Wall Street South" due to its growing financial and tech sectors. The city’s lack of state income tax and its strategic location as a hub for international business have made it a magnet for professionals and companies alike. While Miami tops the list, the Midwest is home to many of the hottest rental markets, with suburban Chicago, Detroit, Lansing, and Minneapolis-St. Paul ranking among the most competitive. These regions are experiencing growth in industries such as healthcare and technology, drawing new workers and increasing demand for housing.

Rents Begin to Rise Again After Months of Decline

After a period of easing, rent prices are starting to climb once more. According to ApartmentList, rents rose by 0.3% in February, marking the first monthly increase after six consecutive months of declines. While rents are still 0.4% lower than they were in February 2023, this upward trend signals a potential shift in the market. Historically, the busy rental season begins in February, and experts predict that rents will continue to rise throughout the summer. However, renters can take some comfort in knowing that the national median rent remains 4.6% below its peak in August 2022, translating to a $67 monthly savings.

The Bigger Picture: Why the Rental Market Remains Challenging

The rental market’s competitiveness is a multifaceted issue, driven by a combination of factors such as limited supply, high demand, and economic uncertainty. While apartment construction reached record highs last year, it has not been enough to meet the needs of a growing population of renters. Additionally, the for-sale housing market’s affordability challenges and rising interest rates have kept many would-be buyers in the rental market, further intensifying competition. As the year progresses, renters can expect a challenging landscape, with rising rents and fierce competition for available units. For now, it’s clear that the rental market remains a highly competitive and dynamic space.