Rents Will Fall As Wave of New Apartment Construction Hits Housing Market

Look closely, though, and you'll see that 2023 is shaping up to be the year that tenants claw back bargaining power from landlords. It may not feel that way just yet, but double-digit rent increases and eye-watering lease demands are now a thing of the past. RealPage, a real-estate-software company, declared in a report last month that the market was "rapidly shifting in favor of renters." A rise in the number of empty apartments, a decline in the number of people looking for a place of their own, and a coming influx of apartment supply will force landlords to compete more fiercely for tenants. And when landlords compete, tenants win -- with concessions like months of free rent, free parking, and gift cards.

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With more apartments sitting open and fewer people looking to move into them, landlords could be forced to hold rents steady, or even cut prices, to entice prospective tenants to pick their units. Asking rents, which measure the rents paid by people moving into a new apartment, rose just 2.4% year over year in January, the smallest annual increase since May 2021 and about one-sixth of the rent increase from a year earlier, according to Redfin. And as every month passes, the deals are getting better -- the median US asking rent fell 1.9% between December and January, from $1,979 to $1,942, Redfin reported. Zillow's measures differed slightly, but the takeaway was the same: The last few months of 2022 marked "the biggest monthly declines in rent for any time of year that we had seen in our data going back to 2015," Jeff Tucker, a senior economist at Zillow, told me. "It's a pretty major pullback by renters."

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For now... the wave of supply that's already underway should keep rents in check over the next couple of years. The slowdown will be particularly pronounced in downtown areas where cranes dot the horizon and high-rent-building owners are bracing for thousands of new units to hit the market. The competition among landlords will mean better deals for renters -- this year, especially, it could pay to shop around when your lease runs out.