Zillow Finds Rental Affordability Reaches Four-Year High
(Photo credit: Mike Sorohan)
Rental affordability is better than any time in the past four years, giving prospective renters a slight break on new leases, according to Zillow, Seattle.
“Subdued rent growth and record-breaking concessions from landlords are turning up now after a deluge of newly built apartments hit the market last year,” Zillow’s September rental market report said.
Builders responded to a surge of demand for housing during the pandemic, finishing more multifamily units in 2024 than any year in a half-century. Builders in the South–where there are fewer zoning restrictions–reacted more quickly and efficiently to renters’ needs, helping create pockets of affordability.
“Markets that built more–and faster–are seeing that investment pay off with more renters able to comfortably afford an apartment,” said Orphe Divounguy, senior economist at Zillow. “It’s a reminder that housing costs can be tamed when policy allows supply to keep up with demand.”
National rent growth in multifamily units listed on Zillow eased to 1.7% over last year in September, the second-lowest annual growth seen since 2021. A weaker labor market is also contributing to slower rent growth this year.
Zillow’s rent market dashboard found falling apartment rents are concentrated in the Sun Belt and the Mountain West regions. Apartment rents are falling fastest year over year in Austin (-4.7%), Denver (-3.4%), San Antonio (2.3%), Phoenix (-2.2%) and Orlando (-0.8%). Higher rent growth is centered in areas with stricter building regulations and in high-demand areas, led by Chicago (6%), San Francisco (5.6%), New York (5.3%) Providence, R.I. (4.8%), and Cleveland (4.2%).
Even single-family rents–which have significantly outperformed apartments in recent years–are feeling headwinds. September’s 3.2% year-over-year rise in single-family rent is the smallest annual growth in Zillow records that start in 2016.
Freebies for Renters Rise
In recent years rental managers have turned to offering concessions such as free months of rent or free parking rather than lowering rents. Now 37% of rentals on Zillow offer some sort of freebie, a record high for September and up from just 14.4% in 2019.
“Those concessions likely will continue to rise; they typically peak in winter or early spring,” the report said. “As concessions become the norm, property managers may need to consider price cuts, particularly as the year winds down. Competition among prospective renters tends to fall off over the cooler winter months.
Zillow noted cooler growth and even declining rents in some markets are contributing to better nationwide affordability than renters have seen in four years. A typical rental now requires 28.4% of the median household income nationally, down slightly from 28.8% a year ago and below the 30% threshold where housing becomes a financial burden.
Rent affordability improved over the past year in 38 of the 50 largest U.S. metros, and renters in Denver, Austin, Miami, San Antonio and Phoenix were the biggest beneficiaries.
