Rental Market Remains Competitive Despite record Apartment construction
Table of Contents
- 1. Rental Market Remains Competitive Despite record Apartment construction
- 2. Record Construction Not enough to Meet Demand
- 3. Rising Rental Competitiveness Index
- 4. increased Lease Renewal Rates
- 5. High Occupancy Rates and Extended Lease Periods
- 6. Regional Hotspots: Miami and the Midwest
- 7. Rents on the Rise Again
- 8. Long-Term Rental Trends
- 9. Looking Ahead: Navigating the competitive Rental Market
- 10. How can alternative ownership models bridge the gap between renting and owning, and incentivize the construction of more affordable housing options?
- 11. Navigating the Competitive Rental Market in 2025: An Expert’s Perspective
- 12. Record Construction vs. Market Reality
- 13. The rental Competitiveness index & Renewal Rates
- 14. Regional Rental Market Hotspots
- 15. Rents on the Rise Again
- 16. Long-Term Rental Affordability
- 17. A Thought Provoking Question
Despite a significant surge in new apartment construction, the rental market remains fiercely competitive in early 2025. according to recent data, securing a rental unit is proving increasingly challenging for prospective tenants. This trend is driven by several factors, including rising lease renewal rates and sustained high occupancy levels.
Record Construction Not enough to Meet Demand
In 2024, developers completed nearly 600,000 multifamily units nationwide, according to the U.S. Census bureau. This represents a 34% increase from 2023 and marks the highest level of construction as 1974.
- New York City
- Dallas
- Austin, Texas
Though, this influx of new supply has not translated into a cooling of the market’s competitiveness.
Rising Rental Competitiveness Index
RentCafe’s Rental Competitiveness Index indicates that rental competitiveness has actually increased nationally at the beginning of 2025. A key driver of this trend is the growing number of renters choosing to stay put.
increased Lease Renewal Rates
Lease renewal rates have climbed to 63.1% in early 2025, up from 61.5% during the same period last year,according to RentCafe. This is due to elevated mortgage rates and continued high prices in the housing market,making renting a more attractive option.
High Occupancy Rates and Extended Lease Periods
Apartment occupancy remains strong at 93.3%, slightly higher than at the start of 2024. Landlords are also offering longer lease periods, contributing to extended renewal periods. The result is an average of seven applicants vying for each available apartment.
Regional Hotspots: Miami and the Midwest
Miami boasts the highest occupancy rate and is the most competitive rental market, wiht an average of 14 applicants per unit.
According to Veronica Grecu, senior creative writer and researcher for RentCafe, “Throughout the last few years, Miami has established itself as ‘Wall Street South,’ attracting major banking institutions and investment firms, while existing industries like tech and healthcare continue to grow, bringing in more workers. Plus, Miami’s lack of income tax and its location at the crossroads of the Americas remain major draws for professionals and businesses.”
The Midwest also presents a highly competitive landscape, with 10 of the top 20 hottest rental markets located in the region. Suburban Chicago ranks second only to Miami. Other notable Midwest markets include:
- Detroit
- Lansing
- Grand Rapids, Michigan
- Cincinnati
- Milwaukee
- Minneapolis-St. Paul, Minnesota
Rents on the Rise Again
After a period of easing, rents are now showing signs of increasing. Nationwide, rents rose 0.3% in February, marking the first monthly increase after six consecutive months of declines, according to ApartmentList. This upward trend is expected to continue throughout the summer, which is typically the busiest season for the rental market. Despite the recent increase, rents are still 0.4% lower than they were in February 2024.
Long-Term Rental Trends
While the national median rent has fallen 4.6%, or $67 per month, below its august 2022 peak, it remains 20% higher than it was in January 2021, according to ApartmentList.
According to the ApartmentList report’s authors, “Year-over-year rent growth has now been negative since June 2023, but in recent months, there are signs that a return to positive growth is on the horizon.”
The rental market in early 2025 is characterized by high demand and limited supply, creating a challenging environment for renters. While record apartment construction has occurred, it has not been sufficient to offset the factors driving rental competitiveness. As rents begin to rise again, prospective tenants should be prepared for a competitive search process. Consider expanding your search area, be prepared to act quickly when a suitable property becomes available, and strengthen your submission with strong references and proof of income. Knowing what to expect is the best way to be prepared!
How can alternative ownership models bridge the gap between renting and owning, and incentivize the construction of more affordable housing options?
The rental market in early 2025 presents a complex landscape for renters. Despite record apartment construction, finding an affordable and suitable rental unit remains a challenge in many areas of the country. To shed light on this trend, we spoke with Sarah chen, a Senior Real Estate Analyst at Market Insights Group.
Record Construction vs. Market Reality
Archyde: Sarah, thanks for joining us. We’re seeing these headlines about record apartment construction, but the rental market still feels incredibly competitive. What’s the disconnect?
Sarah Chen: Thanks for having me. You’re right, the numbers can be misleading. While we’ve seen ample construction increases, particularly in cities like New York, Dallas, and Austin, it’s often not enough to offset the underlying demand. We’re playing catch-up from years of underbuilding,and population shifts are further exacerbating the issue.Plus, consider the types of units being built – are they truly affordable and meeting the needs of the average renter?
The rental Competitiveness index & Renewal Rates
Archyde: RentCafe’s Rental Competitiveness Index points to increased competition despite the new builds. What are the main factors driving this increased competitiveness?
Sarah Chen: lease renewal rates are a huge factor. People are staying put longer. With elevated mortgage rates still impacting home affordability, renting continues to be a financially sensible choice for many. Our data shows a meaningful uptick in renewal rates – people are choosing to renew their leases rather than face the challenges of buying in the current market or even finding a new, comparably priced rental. This means fewer units are coming available in the first place.”
Regional Rental Market Hotspots
Archyde: Miami and the Midwest are cited as particularly competitive rental markets. What makes these regions so challenging for renters?
Sarah Chen: Miami’s surge is fueled by its growing reputation as a financial hub and attractive lifestyle destination. The influx of businesses and professionals has created intense demand. The Midwest, conversely, is seeing a resurgence, with cities like Detroit, Cincinnati and Minneapolis experiencing renewed economic vitality. Often, these markets offer a more affordable alternative to coastal cities, drawing in businesses and residents alike, putting pressure on the existing rental supply.”
Rents on the Rise Again
Archyde: After a period of easing, rents are now showing signs of increasing again. What’s your outlook for rental prices in the coming months?
Sarah Chen: We anticipate a continued upward trend, particularly through the summer months, which are traditionally the busiest for the rental market. While rents are still slightly below their peak from 2022, the recent increase in February likely signals the end of the rental ‘dip.’ Strong demand,coupled with the factors we’ve discussed,will likely contribute to continued price pressure.
Long-Term Rental Affordability
Archyde: Considering that rents are still significantly higher than pre-pandemic levels, what advice would you give to renters navigating this market?
Sarah Chen: Be prepared. Start your search early, expand your search area if possible, and have all your documentation in order – credit reports, proof of income, references.Also, consider smaller apartments or co-living arrangements to cut down on monthly payments. Negotiation is also crucial. In a high demand place like Miami, landlords have options for who they select, making now the time to stand out on your renter application .
A Thought Provoking Question
Archyde: what innovative solutions coudl address the long-term affordability challenges in the rental market that policy-makers are missing or ignoring?
Sarah Chen: That’s a complex question. It involves re-examining zoning laws to enable denser, more diverse housing options, incentivizing developers to build affordable units, and exploring alternative ownership models that bridge the gap between renting and owning; also governments need to seriously consider funding and investment into additional affordable housing for low income residents impacted the most. We need a multi-pronged approach that addresses both supply and demand, and prioritizes the needs of renters across the income spectrum. What are your readers seeing in their local markets? Do they have ideas on driving down costs and helping renters?
