Why Rents Are Falling in Parts of the US — and What That Means for Property Buyers

Rents are cooling — but the picture is uneven

The recent turn in the real estate USA market is hard to ignore: after pandemic-era spikes, rents are falling in many metros. Last month the national median rent fell by 1.7% year-over-year, according to Apartment List — the largest annual decline since the firm began tracking rents in 2017. The most dramatic example is Austin, Texas, where rents dropped 6% in the past year and the metro median is back to $1,274, roughly where it stood before the pandemic.

This is not a small correction. Our analysis of the reporting by Apartment List and a case study from the Pew Charitable Trusts shows a mix of market cycles and deliberate policy changes that together explain why some cities are seeing cheaper rents, while others remain painfully expensive.

Quick take for investors and buyers

• If you follow the property market in USA growth corridors, understand that supply-side policy can change returns quickly. Austin’s experience suggests that zoning and regulations matter for developers’ incentives.
• But housing is hyperlocal: the same national trend can hide strong submarket divergence. You must analyze city-level supply pipelines, permit trends, and recent local reforms before making acquisition decisions.

What happened in Austin: a supply-side experiment

Austin’s story is the most-cited example in recent months. The Pew Charitable Trusts found that between 2015 and 2024 the city added 120,000 new homes, a rise of 30% in housing stock. That is a massive increase for a single metro over less than a decade.

Policy changes that accompanied the construction surge included:

• Updating zoning codes to allow taller apartment buildings in more places without a special permit.
• Reducing and then eliminating parking minimums for almost all new homes by 2023.
• Making accessory dwelling units (ADUs) easier to build.
• Allowing up to three homes on lots zoned for single-family use and lowering minimum lot sizes.
• Creating density bonuses that let developers build taller in exchange for some income-restricted units.
• Legalizing five-story apartment buildings with a single staircase, a code change adopted last year.

Pew’s report connects those reforms to falling rents, noting that new supply was not limited to luxury towers. The city produced a mix of unit types — large multifamily, smaller apartment buildings, townhouses, and starter single-family homes — and the rent decline was especially strong in older, lower-cost "Class C" buildings from 2023 to 2024.

Our reading of these findings: expanding allowable housing types and removing common regulatory cost drivers, like parking requirements, reduced the barriers to new construction. That pushed down rents broadly, not just at the top of the market. For buyers and investors, that means new supply in formerly tight markets can create near-term pressures on rental growth even as it increases long-run occupancy and resident choice.

National context: a multifamily construction boom

Austin did not act in a vacuum. Apartment List’s analysis points to a wider American trend: a multifamily construction boom in many Sunbelt metros produced large numbers of new rental units that started coming online around 2022. Chris Salviati, chief economist at Apartment List, called it “a big multifamily construction boom,” and argued that completions of those properties explain much of the rent softening.

A few national data points worth noting:

• From 2017 to 2026, the US national median rent grew about 3% per year on average, which is slower than overall inflation for the same period.
• Rents in some formerly fast-growing markets have moderated or fallen: Denver, San Antonio, and Portland are among cities with noticeable declines.
• Some high-cost metros like San Francisco have seen average annual rent growth of less than 1% since 2017, not because affordability has been fixed but because prices may have hit a ceiling that the market cannot sustain.

That combination — a construction boom in many Sunbelt metros and a pre-existing unaffordability ceiling in certain coastal cities — explains part of the national decline. In plain terms, when developers respond to high rents by delivering lots of new apartments, rents can fall or stabilize as supply catches up with demand.

The debate: policy effect or market cycle?

Not everyone agrees that Austin’s rules were the decisive factor. John Mondragon, a research adviser at the Federal Reserve Bank of San Francisco, co-authored a working paper questioning the strength of measured supply constraints in explaining metro-level price movements. He argued that the building response to elevated pandemic-era prices might explain the construction surge in Austin and other cities even without policy changes.

That critique has sparked a vigorous debate. Economists Michael Wiebe and Salim Furth published formal refutations; Mondragon’s team replied with further analysis and FAQs. The National Multifamily Housing Council, representing apartment developers, has suggested builders simply acted on price signals.

Where the arguments converge:

• Everyone agrees supply matters for prices at some level.
• The dispute is about how much zoning and regulatory reform matters for metro-level outcomes versus natural market cycles.

Pew’s researchers stress that many of Austin’s newly built units wouldn’t have been legally possible before the reforms. That is a concrete claim: it is not just that builders responded to high prices, but that reforms expanded the set of buildable projects.

Our assessment: causation is hard to prove with short-run data, but the combination of regulatory changes and price incentives makes the case for policy effectiveness plausible. For investors, this means policies that reduce friction for multifamily development are worth tracking closely because they change the supply calculus for developers and therefore the path of rents.

Where the national averages hide risk: hyperlocal markets

National statistics mask enormous local variation. The same period that saw national rents fall hides cities where rents kept rising.

Examples from the reporting:

• Madison, Wisconsin saw rents grow by more than 7% per year on average from 2017 to 2026. Madison added 22,472 homes between 2015 and 2024, a 20% increase, but still underproduced relative to demand.
• San Francisco added about 29,500 homes from 2009 to 2019 but had job growth that implied a need for 154,000 units in the same period. That shortfall explains why its rental market behaves differently.

Takeaways for buyers and investors:

• Look beyond metro-level headline rents. Drill into neighborhood-level supply pipelines, building permit data, vacancy trends, and the types of units coming online.
• Markets that have expanded supply rapidly can still see rent pressure if population and job growth outstrips deliveries.
• Coastal, highly regulated metros may show flat rents not because they fixed affordability but because they reached a demand ceiling — and would-be renters are pushed to cheaper regions.

Practical implications: how policy changes affect returns and risk

If you’re acquiring property or allocating capital to the US real estate sector, here are practical points to weigh.

• Timing matters. Newly completed multifamily inventory can depress rents for a few quarters to a couple of years in a submarket. If you buy a stabilized asset near a wave of completions, rental growth may underperform expectations.
• Product type matters.